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NON PRODUCTION OF BOOKS OF ACCOUNTS IN WAREHOUSE, Goods and Services Tax - GST |
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NON PRODUCTION OF BOOKS OF ACCOUNTS IN WAREHOUSE |
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Dear experts The inspecting authority authorised under Section 67[1] of the GST Act inspects the declared warehouse wherein he finds some quantity of taxable goods not covered by valid documents. However in respect of such goods, the relevant documents like E-way bill and Tax invoices are kept in the main office of the taxpayer which precisely match the description of goods found in the warehouse and they are duly accounted for in the books of account both by the supplier and the recipient. But the inspecting authority is refusing to accept such documents saying that it is an attempt to evade tax and initiates proceedings under Section 74[5] of the Act proposing to levy tax, interest and penalty. Is such proceeding under Section 74[5] of the Act tenable in the eye of law? Any supporting rulings on this ? Posts / Replies Showing Replies 1 to 12 of 12 Records Page: 1
I dont think Section 74 can be invoked in such case. In order to invoke 74, the Dept has to establish short payment/ Non payment/ wrong avilment/ utilisation of ITC / erroneous refund first. Dept cannot assume itself jurisdiction under section 74, merely due to the presence of taxable goods in a declared warehouse. Establishing "supply" is a qua sine non for invoking section 73/74 in my opinion.
Accounts and other records . 35. (1) Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of—
Provided that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business: Further Sub Section 6 of Sec 35 says (6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered person fails to account for the goods or services or both in accordance with the provisions of sub-section (1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of such tax. From the above it is clear that proceedings can be taken under Sec 73 or 74 by the proper Officer. The only possibility, in my opinion is to plead our bonafides in adjudication as well as appeal.
Dear Venu Ji, thanks for pointing out section 35(6). I stand corrected to the extent that there is a deeming fiction in section 35(6) that "goods or services or both not accounted for, shall be treated as supplied by such person" for the purpose of sec 73/74. However even considering the same, from the facts from query it appears that the goods in declared godown cannot be still considered as "not accounted for" merely because the records are not maintained at that premise especially when it is supported by e-way bill and tax invoice and duly accounted in books of accounts kept in the main office.
Dear Venu ji In this case, the subject goods are admittedly accounted for in the books of account. Whereas Section 35[6] speaks about determination of tax on "deemed supply" if there is "failure to account for". So I am of the opinion that in the situation explained by me, the scope to invoke Section 35[6] read with Section 73/74 of the Act does not arise. Sh.Padmanathan ji has rightly distinguished the situation. Your further comments are solicited to expand the clarification.
Both main office and warehouse pertains to same taxpayer. So, merely the invoice is not available at warehouse wont indicate the invoice is absent. The accounting at main office suffice the requirement of accounting being done. At last both the main office and warehouse are of the same taxpayer.
Sh.Sadanand Bulbule Ji, Sir, Such SCN has no legs to stand. The Officer's action is not justified in the eyes of GST laws. The judgments on the issue are easily traceable. The higher officers will not approve such proceedings or the issuance of the SCN.
I do agree with the view of the experts that no demand can sustain in this case and SCN ought not to have been issued at all. But the fact is that an SCN has already been issued. Now at what stage one would get relief is the million dollar question. Nothing prevents the Officer from canvassing an alternate tax position invoking Sec 35 (6) r.w. Sec 73/74 and issuing an SCN and later confirming the demand. Every SCN in GST is an alternate tax position canvassed by the department. To take such an alternate tax position Sec 35 (6) definitely gives him enough ammunition and cause of action. In GST every SCN should be viewed as a first step in an adversarial litigation. So in my humble opinion we should expect relief in these kind of cases only at the Appellate level. And, surely, in reply to the SCN we need to create a solid foundation for a prolonged litigation. Apart from legal issues, even technical issues ought to be highlighted in reply to SCN. Otherwise provisions of Sec 160(2) might prevent us from pleading technical defects etc at a later stage.
Dear Venu ji Your apprehension is perfect.There are seldom examples where SCNs are dropped on merits. Thanks for your additional inputs.
Fair justice at which stage. Nothing can be said. It is sheer luck. Continue trying your luck.
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