2021 (2) TMI 705 - Commissioner - GST

Clandestine manufacture and removal - excess stock of Perfume/Compound found in the residential premises - seizure and detention of excess found goods - Confiscation - HELD THAT - It is found that on being asked by the officers of DGGI regarding documents pertaining to excess stock of perfume/compound found in his residence, Sh. Ashok Agarwal, Director of M/s. MPPL, Jaipur stated that the said perfume/compound were lying at his residence premise is pertained to M/s. MPPL, Jaipur and was kept to maintain the secrecy of their technical know-how of the product as they had to carry out certain process of blending perfume/compound in his residence premises since last one year. During the statement of Sh. Ashok Agarwal, Director of M/s. MPPL, Jaipur all seized records were shown to find out the relevant invoices of seized perfume/compound but he replied that he was unable to find out the relevant records of perfume/compound, seized by the officers of DGGI under panchanama dated 10/11-11-2017. Further, he had stated that they had purchased perfume/compound from M/s. Gupta Company, Delhi and M/s. Kelkar Company. Regarding excess/unaccounted stock of perfume/compound valued at ₹ 15,79,200/- found unaccounted during search on 10-11-2017, no plausible explanation regarding their procurement/non-accountal of the same in their records/books of account was put forward by the appellant neither during the time of search nor afterwards. Sh. Ashok Agarwal, Director of the appellant company who was looking after the day-to-day affairs of the company and also personally supervised daily activities also admitted the unaccounted stock of perfume/compound and agreed to pay the applicable tax. Further, he has abetted and assisted the clandestine manufacture and removal of taxable goods by acquiring possession, removing, depositing, keeping, concealing and dealing in goods which he knew were liable to confiscation. The appellants have acted intentionally in order to avoid payment of CGST/SGST and did not maintain proper record of the stock of raw material perfume/compound found excess stored in their residence premises, as required under Rule 56 of the CGST Rules, 2017. Further, they did not file monthly/periodically return in respect of the said goods procured and stored in their factory premises as required under the law. They did not maintain stock details of the aforesaid goods in the stock register and did not file monthly GSTR-1 and GSTR-3B returns which also shows that these perfume/compound were procured without any valid documents and intended for manufacture of finished goods to be cleared without payment of tax and the finished goods were intended for clandestine removal without payment of Tax. The appellants were required to comply the provisions of law and to follow the procedure as prescribed under CGST Act/Rules but the appellants have completely failed to do so. Therefore, the goods found in excess/unaccounted were liable for confiscation under Section 130 of the CGST Act, 2017 read with Rule 139 of CGST Rules, 2017 and read with Section 130 of the Rajasthan GST Act, 2017 and the appellants were also liable for penal action under Section 122(1)(xvi) and (xviii)/125 of the CGST Act, 2017 and the Rajasthan GST Act, 2017 - Sh. Ashok Agarwal, Director of the Company was responsible for day-to-day affairs of the company had consciously and deliberately indulged in activities of clandestine manufacture and clearance/supply of taxable goods. Therefore, he is also liable to penalty under Section 122(3)/125 of the CGST Act, 2017. The reliance placed by the appellants in their defence is squarely not applicable in the instant case. Appeal dismissed.

Issues Involved:
1. Allegations regarding difference in stock of raw material, semi-finished goods, and finished goods.
2. Legality of Panchnama proceedings dated 10-11-2017 and 15-11-2017.
3. Lawfulness of seizure dated 15-11-2017.
4. Validity of the statement dated 2-5-2018 of Shri Ashok Aggarwal.
5. Imposition of penalty under Section 122(1)(xvi) and Section 125, Section 122(3) of the CGST Act, 2017.
6. Confiscation of goods under Section 130 of the CGST Act, 2017 read with Rule 139 of the CGST Rules, 2017.
7. Judicial discipline in adjudicating the case.

Detailed Analysis:

1. Allegations regarding difference in stock of raw material, semi-finished goods, and finished goods:
The appellant denied the allegations of stock discrepancies and argued that the investigation wrongly detained and seized the entire stock of perfume/compound. They contended that the investigation did not acknowledge their letter dated 13-11-2017, which provided reasons for the stock differences. The appellant claimed that the order for confiscation of goods was unlawful and that only the alleged excess stock should have been seized.

2. Legality of Panchnama proceedings dated 10-11-2017 and 15-11-2017:
The appellant argued that the Panchnama proceedings were unlawful due to procedural lapses, such as the panch witnesses not offering their personal search before and after the search, and the officers joining the search later without offering their personal search. They claimed that the documents/equipment seized were not relied upon in the SCN and that the Panchnama was manipulated.

3. Lawfulness of seizure dated 15-11-2017:
The appellant contended that the seizure was unlawful as they had provided all stock details immediately after the detention of goods. They argued that the DGGI did not acknowledge the stock position submitted on 13-11-2017 and wrongly converted the detention into seizure.

4. Validity of the statement dated 2-5-2018 of Shri Ashok Aggarwal:
The appellant claimed that the statement of Shri Ashok Aggarwal was recorded under coercion and that he was forced to admit the unaccounted stock of perfume/compound. They argued that the statement was not voluntary and that the DGGI did not consider the stock position submitted on 13-11-2017.

5. Imposition of penalty under Section 122(1)(xvi) and Section 125, Section 122(3) of the CGST Act, 2017:
The appellant argued that the penalty was not imposable as there was no intent or mens rea to evade tax. They cited various legal precedents to support their claim that penalty cannot be imposed in the absence of mens rea. They also contended that the penalty on the Director under Section 122(3) and Section 125 was unjustified as there was no direct allegation against him.

6. Confiscation of goods under Section 130 of the CGST Act, 2017 read with Rule 139 of the CGST Rules, 2017:
The appellant argued that the confiscation of goods was unlawful as the investigation did not specify the offence under Section 130. They contended that they did not commit any offence that would make the goods liable for confiscation under Section 130(1) to 130(7) of the CGST Act, 2017.

7. Judicial discipline in adjudicating the case:
The appellant emphasized the importance of following judicial discipline and cited various judicial pronouncements to support their case. They argued that the adjudicating authority did not consider the legal precedents cited by them and violated the principle of natural justice.

Conclusion:
The adjudicating authority found that the appellants intentionally avoided payment of CGST/SGST, did not maintain proper records, and did not file required returns. The excess/unaccounted stock of perfume/compound was seized and confiscated under Section 130 of the CGST Act, 2017. Penalties were imposed on the appellants and the Director. The authority rejected the appellants' contentions and upheld the impugned order, finding no infirmity in the adjudication process. Both appeals were dismissed.

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