2021 (4) TMI 1137 - HC - GST

Levy of CGST and SGST - Supply of branded packaged rice or not - assessment based on quantity of rice found in the godown - HELD THAT - The officials of GST department had carried out a surprise visit to the premises of the petitioner- company from where several incriminating documents and sizable quantity of packaged rice were seized. The invoices and other sales details established that for the period under consideration, the petitioner had supplied rice in packages of 25 kg each which carried the brand name Aahar Normal, Aahar Gold or Aahar Premium. Sizable quantity of such packaged branded rice was also seized from the premises. It was on the basis of such materials that the adjudicating authority came to the conclusion that the petitioner was engaged in supply of packaged branded rice. The Appellate authority confirmed the finding of the adjudicating authority and dismissed the Appeal of the petitioner. The authorities did not accept the petitioner s ground of the seized rice being only for the internal use and purposes. There are no error in the view of the authorities. Firstly, the conclusions of these authorities are based on assessment of materials on record. Secondly, the seizure of sizable quantity of packaged branded rice was an indication of the petitioner dealing in such product. Thirdly, the tax is not demanded on rice stored and seized but on the quantity of rice already supplied which was assessed from the bill books and invoices seized from the premises of the petitioner-company. Further, the petitioner s defence that the quantity of rice lying in the godowns was merely for internal use was also not backed by any evidence. Close to three thousand bags of rice were found lying in the godown. The petitioner s bare contention that it was not meant for supply but only for internal purposes of grading the rice or part of the stock was lying because of quality disputes, was not backed by any evidence and was therefore correctly not accepted by the authorities. Lastly, the petitioner s contention that the brand was not a registered brand and therefore the petitioner had no liability to pay tax also was rightly not accepted - The brand names under which the petitioner was selling the rice may not have been registered, nevertheless it could lead to an actionable claim in a court of law. In order to avoid inviting liability of tax, the petitioner had to forgone such actionable claim which also the authorities found the petitioner had not done. Petition dismissed.

Issues Involved:
1. Legality of the demand for GST on the supply of branded rice.
2. Validity of the defense provided by the petitioner regarding the supply of non-branded rice.
3. Interpretation of the Notification No. 27/2017 CT (Rate) dated 22.09.2017.
4. Justification for the imposition of interest and penalty under CGST and SGST Acts.

Detailed Analysis:

1. Legality of the demand for GST on the supply of branded rice:

The petitioner challenged the orders dated 03.07.2020 and 27.01.2021 passed by the adjudicating and appellate authorities, respectively. The State Goods and Service Tax Authorities, based on prior intelligence, conducted a raid and found that the petitioner was supplying branded rice in 25 kg bags labeled as "Aahar Normal," "Aahar Gold," and "Aahar Premium" without paying GST. The adjudicating authority issued a Demand cum Show Cause Notice, alleging that the petitioner was liable to pay CGST and SGST on the taxable value of its sales, which was assessed at ?1,03,35,028/-. The petitioner contested this, claiming the rice was for internal use and not for taxable supply. However, the Assistant Commissioner of GST rejected this defense and confirmed the demand for GST, interest, and penalty.

2. Validity of the defense provided by the petitioner regarding the supply of non-branded rice:

The petitioner argued that the rice was not supplied with package markings and was meant for internal use. They also claimed that the branded rice found was old stock meant to be returned due to quality disputes. The adjudicating authority did not accept these defenses, noting that the petitioner had supplied branded rice in packaged units and had not provided sufficient evidence to support their claims. The appellate authority upheld this decision, stating that the petitioner had failed to provide valid records to prove their contention and had suppressed material facts with the intent to evade payment of GST.

3. Interpretation of the Notification No. 27/2017 CT (Rate) dated 22.09.2017:

The appellate authority observed that the adjudicating authority had determined the taxable value based on the introduction of levy on packaged rice under Notification No. 27/2017 CT (Rate) dated 22.09.2017. The petitioner contended that they did not have a registered brand name and had submitted an affidavit forgoing the actionable claim on the brand name. However, the adjudicating authority found that the petitioner had not complied with the conditions specified in the notification and had supplied branded rice, thereby making them liable for GST.

4. Justification for the imposition of interest and penalty under CGST and SGST Acts:

The appellate authority justified the imposition of penalty under Section 74(1) of the CGST and Tripura SGST Acts, stating that the petitioner had suppressed material facts with the intent to evade payment of GST. The authorities found that the petitioner had supplied goods during the period liable for GST payment and had not provided sufficient evidence to support their defense. The invocation of the extended period under Section 74(1) was deemed justified, and the appeal was dismissed.

Conclusion:

The High Court upheld the decisions of the adjudicating and appellate authorities, finding no error in their conclusions. The court noted that the authorities' findings were based on the assessment of materials on record, including the seizure of packaged branded rice and invoices. The petitioner's defense was not backed by sufficient evidence, and the contention that the brand was not registered was irrelevant due to the expanded requirement under the amended notification. The petition was dismissed, and the petitioner was held liable to pay GST, interest, and penalty as determined by the authorities.

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