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2021 (4) TMI 569 - Commissioner - GSTClandestine Removal - seizure of unaccounted/excess goods - partner and manager of the assessee could not produce any documents or records related to the finished goods found in the premises - Confiscation of goods - redemption fine - penalty. HELD THAT - Respondent no where raised any objection of search proceedings as well as Panchnama proceedings conducted by the investigating team from which it may be inferred that the entire proceedings were conducted in transparent and fair manner. During the proceedings the physical stock was also verified and it was found excess against the entries of stock register/books of accounts. The whole proceedings were done in the presence of two independent witnesses and in the presence of employees of the respondent/assessee and on later period the Partner of the Firm had also joined the search proceedings. During the proceedings, the statement of Accountant, Manager and Partner of the Firm were recorded under Section 70 of CGST Act before the proper officer. From the above facts, it is emerged that during the search proceedings the excess stock were found against the entries of stocks register and this fact have not been objected neither by the employees of the Firm nor by the Partner of the Firm himself. This fact has also been accepted by the adjudicating authority in his findings - the adjudicating authority s finding is based are on the submission of respondent/assessee only and he grossly ignored the statement of employees of the Firm which had endorsed rather admitted by the Partner of Firm himself and in the tax matter the statement has the evidential value under the evidence Act. In the various Supreme Court judgments it has been pronounced that the statement recorded before Tax Authority is merely not a statement recorded before Police Officer but it is a piece of evidence. The statement recorded under the said provisions constitute substantive piece of evidence and can be relied in adjudication proceedings - Even if such statement is retracted or diluted in subsequent statement, it can be appreciated in light of other circumstances and evidence. Levy of Redemption Fine - HELD THAT - The adjudicating authority has erred by holding that the seized goods is not liable for confiscation and release the same contrary to this view it is found that the respondent assessee has contravened the provisions of Section 35 of CGST Act read with Rule 56 of CGST Rules, 2017. Therefore, seized goods is liable to confiscation in terms of Section 130 (1), (ii) (iv) of CGST Act and rules made thereunder. However, since the goods has already been ordered to release the said seized goods by the adjudicating authority therefore there are no option but to impose the fine under Section 130 (2) in lieu of confiscation of the said released goods. Levy of penalty on firm u/s 122(1) (xvi) and (xviii) of CGST Act, 2017 - HELD THAT - It has established that the assessee did not maintained the proper books of account at the time of search proceedings hence he violated the provisions of Section 35 of CGST Act and Rules made thereunder - the penalty under Section 122(1) (xvi) and (xviii) of CGST Act, 2017 upon the assessee is very well attracted in the instant case. Levy of penalty on partner - HELD THAT - It has been established that the Partner of the firm is the key person who deals all the affairs of the Assessee firm. Therefore, he can not be escaped from any offence of the firm and it can not be imagined that without his involvement such kind of violations of the provisions of the act or rules made thereunder would be happened. Further, the Partner has himself admitted the said offence in his statement recorded under the provisions of law. Appeal disposed off.
Issues Involved:
1. Whether excess stock was found during the physical stock verification against entries made in the stock register. 2. Whether the seized excess stocks are liable to be confiscated under Section 130 of the CGST Act, 2017, and Rule 139 of the CGST Rules, 2017. 3. Whether penalty is imposable upon the Firm/Assessee under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017. 4. Whether penalty is imposable upon the Partner of the Firm under Section 122(3) of the CGST Act, 2017. Detailed Analysis: Issue 1: Excess Stock Verification and Liability for Confiscation The appellant contended that the adjudicating authority erred in holding that the seized goods deserved release as they were not liable to confiscation. The appellant emphasized that the taxpayer failed to maintain stock accounts for more than a month, violating Section 35 of the CGST Act and Rule 56 of the CGST Rules, 2017. During the search, the Accountant admitted to updating production records post issuance of sale invoices by back calculation, and the Manager admitted to clandestine clearance, both of which were corroborated by the Partner. The respondent argued that the stock found during the search was not excess but slightly short due to inaccurate stock-taking and manufacturing process loss. They claimed that the books of accounts were incomplete, and they were not allowed to update them during the search. After obtaining photocopies of the seized documents, the respondent completed the entries and submitted the updated stock details to the investigating authority, which the adjudicating authority verified before releasing the goods. The adjudicating authority’s decision to release the goods was based on the respondent's submission without thoroughly examining the records. The adjudicating authority failed to verify the genuineness of the records submitted by the respondent. The statements of the Accountant, Manager, and Partner, which were admitted during the proceedings, were ignored. The adjudicating authority’s findings were not supported by substantial evidence, and the value of the seized goods was correctly arrived at by the investigating authority based on the Kachha System admitted by the Accountant. The adjudicating authority’s decision to release the seized goods was incorrect. The respondent violated Section 35 of the CGST Act and Rule 56 of the CGST Rules, 2017. The seized goods were liable to confiscation under Section 130 (1)(ii) & (iv) of the CGST Act. However, since the goods were already released, a fine of ?8,00,000 was imposed in lieu of confiscation. Issue 2: Imposition of Penalty on the Firm/Assessee The respondent argued that no excess stock was found, and hence no penalty was leviable under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017. They claimed to have maintained the required books of accounts as per the CGST Act, with only a delay in posting production entries. The adjudicating authority’s findings were based on the respondent’s submission without verifying the records. The respondent did not maintain proper books of accounts at the time of the search, violating Section 35 of the CGST Act. Therefore, the penalty under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017, was justified. Issue 3: Imposition of Penalty on the Partner The respondent argued that none of the clauses of Section 122(3) were applicable and that imposing a penalty on the Partner was unjustified since penalties were already imposed on the firm. The Partner of the firm was a key person involved in all affairs of the firm. The violations could not have occurred without his involvement. The Partner admitted the offences in his statement, making the penalty under Section 122(3) of the CGST Act, 2017, justified. Order: 1. The seized goods amounting to ?92,94,810 were ordered to be confiscated under Section 130(1)(ii) & (iv) of the CGST Act, read with Rule 139 of the CGST Rules, 2017. A fine of ?8,00,000 was imposed in lieu of confiscation. 2. A penalty of ?16,73,066 was imposed on M/s Tirupati Plywood Industries under Section 122(1)(xvi) and (xviii) of the CGST Act. 3. A penalty of ?8,000 was imposed on the Partner, Sh. Praveen Goyal, under Section 122(3) of the CGST Act. The appeal was disposed of accordingly.
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