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TMI Blog2020 (12) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... itten arguments, no written arguments have been filed by the respondents. 4. Facts, in brief, are that the petitioner is engaged in manufacture of lead ingots falling under GST Tariff Chapter Heading No. 7804. They are duly registered under the GST Act. On 6.1.2018 Anti Evasion Department of GST, Greater Noida visited the factory premises of the petitioner for verification of the records. 5. The petitioner claimed that petitioner had produced all the Returns of TRANS-1. It is alleged that on 10.1.2018 another team from the same department visited the factory premises and passed an order of detention detaining 12,979 metric tonnes of entire stock of the petitioner. It is alleged that the said stock included the stock manufactured prior to enforcement of GST. The petitioner claimed that it produced all the records, however, the records of GST were not available in the factory premises as the same were kept at head office of the petitioner situated at Ghazipur. It is further stated that subsequently the records were produced on various dates on 16.1.2018, 20.1.2018, 23.1.2018 and 31.1.2018. It is stated that despite production of the records, as sought for, an order dated 4.4.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock of raw materials, work in progress and finished goods as detailed given above, in the factory premises. As the party could not produce any mandatory accounts and other records, the officers had all reasons to belief that the said goods have been stored by the party only to clear them without payment of GST as applicable." 8. The petitioner claimed to have filed its reply to the show cause notice denying the charges and that any verification of the stock was conducted. It was further submitted that no document showing unaccounted cash was found. The petitioner also denied its liability and requested for dropping of the show cause notice and proposed penalty. 9. It is also on record that aggrieved against the show cause notice dated 21.5.2018, the petitioner preferred a writ petition before this Court being Writ Petition(Tax) No. 334 of 2019, which was disposed of by this Court on 15.3.2019 directing the respondents to decide the issue within a period of three weeks in accordance with law. In pursuance to the direction issued by this Court, the Additional Commissioner, GST & Central Excise Commissionerate, Gautam Budh Nagar heard the matter and passed an order confiscating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration certificate issued under the GST. He further argues that even assuming without admitting the charges levelled against the petitioner the quantum of penalty that could have been imposed for violation of not keeping the documents at the manufacturing premises could not exceed Rs. 10,000/- inasmuch as no exercise for quantifying the "tax evaded" has ever been carried out nor is there any allegation with regard to evasion of tax even in the show cause notice.He argues that in terms of the provisions of GST, Section 12 clearly specifies that the liability to pay the tax on the goods arises only at the time of supply. He further stresses that Section 12 (2) clearly specifies that the time of supply of goods shall be the earlier of the following namely ; the date of issue of invoice by the supplier or the date on which the supplier receives the payment with respect to such supply and argues that there is neither any allegation with regards to issuance of invoices nor is there any allegation with regard to receiving of the payment. He further argues that even the confiscation is bad in law inasmuch as the confiscation of goods can happen only under Section 130 (1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformed to the anti evasion officer that all the documents related to production and Cenvat are generally kept at their Head Office, located at Ghazipur, Delhi. They generally do not keep any production related document at their Dadri unit." 14. It is further recorded that Section 35 (1) of the CGST Act requires that "Every Registered person shall keep and maintain records as mentioned in Clause (a) to (f ) of Section 35 at the principal place of business as mentioned in the certificate of registration", and as the party could not produce the mandatory records, the officers have 'reason to believe' that the petitioner is engaged in continuous process of production and supply and thus, goods were liable to be confiscated under Section 130 (1) of the CGST Act. It was also recorded in the show cause notice that principal place of business, as disclosed in the registration certificate, was shown as F-1A, SDF NSEZ, NOIDA. 15. It is interesting to note that in Paragraph No. 11 of the show cause notice, it is recorded that party was not maintaining records as are required under Section 35 (1) and thus they have violated the mandate of Section 35 (1) of the CGST Act. Curiously, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are not accounted for. It is however, a common ground that no such exercise as envisaged under Section 35 (6) read with Section 73 or Section 74 has ever been undertaken nor the adjudication with regard to the amount was ever being done. 18. Thus, the Adjudicating Authority, after recording that the party has failed to maintain the records as required under Section 35 (1) of the Act, held that the goods were liable to be confiscated and proceeded to pass order to the following effect: "(1) I order for confiscation of raw materials, Work in progress materials and finished goods [earlier seized on 04.04.2018 vide Form GST INS-02 (Order for Seizure) dated 04.04.2018] totally valued at Rs. 1,07,99,43,351/- and involving Central GST of Rs. 9,71,94,902/- & State GST of Rs. 9,71,94,902/- under Section 130 of the Central GST Act, 2017 &Section 130 of the Uttar Pradesh GST Act, 2017 read with Section 35(6) of the CGST Act, 2017 & Section 35(6) of the Uttar Pradesh GST Act, 2017 and Section 74(1) of the CGST Act; 2017 & Section 74(1) of the Uttar Pradesh GST Act, 2017 on the grounds as discussed hereinabove. However, I give an option to the party to redeem the confiscated goods on pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Act are being quoted for ready reference: Section 35 (1)of the CGST ACT, 2017 "(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- (a) production or manufacture of goods; (b) inward and outward supply of goods or services or both; (c) stock of goods; (d) input tax credit availed; (e) output tax payable and paid; and (f) such other particulars as may be prescribed: 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: Provided further that the registered person may keep and maintain such accounts and other particulars in electronic form in such manner as may be prescribed." Section 35 (6) of the CGST ACT, 2017 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person. (7) Every registered person shall keep the books of account at the principal place of business and books of account relating to additional place of business mentioned in his certificate of registration and such books of account shall include any electronic form of data stored on any electronic device. (8) Any entry in registers, accounts and documents shall not be erased, effaced or overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter, the correct entry shall be recorded and where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained. (9) Each volume of books of account maintained manually by the registered person shall be serially numbered. (10) Unless proved otherwise, if any documents, registers, or any books of account belonging to a registered person are found at any premises other than those mentioned in the certificate of registration, they shall be presumed to be maintained by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally. (17) Any person having custody over the goods in the capacity of a carrier or a clearing and forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person shall maintain true and correct records in respect of such goods handled by him on behalf of such registered person and shall produce the details thereof as and when required by the proper officer. (18) Every registered person shall, on demand, produce the books of accounts which he is required to maintain under any law for the time being in force. CGST Rule 57: Generation and Maintenance of Electronic Records "(1) Proper electronic back-up of records shall be maintained and preserved in such manner that, in the event of destruction of such records due to accidents or natural causes, the information can be restored within a reasonable period of time. (2) The registered person maintaining electronic records shall produce, on demand, the relevant records or documents, duly authenticated by him, in hard copy or in any electronically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) obstructs or prevents any officer in discharge of his duties under this Act; (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; (xv) suppresses his turnover leading to evasion of tax under this Act; (xvi) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder; (xvii) fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act; (xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (xix) issues any invoice or document by using the registration number of another registered person; (xx) tampers with, or destroys any material evidence or document; (xxi) disposes off or tampers with any goods that have been detained, seized, or attached under this Act, he shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade thereunder with intent to evade payment of tax; or (ii) does not account for any goods on which he is liable to pay tax under this Act; or (iii) supplies any goods liable to tax under this Act without having applied for registration; or (iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122. (2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit: Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon: Provided furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to keep the said documents as specified in Clause (a) to (f) in the electronic form. 24. Section 35 (6) of the said Act provides that in the event the person fails to keep their accounts for the goods or the services in accordance with the provisions of Sub-section 1of Section 35, the proper officer is empowered to determine the amount of tax payable on the goods or the service which are unaccounted for as if such goods or services had been supplied by such person and the provisions of Section 73 or 74 shall mutatis mutandis apply for determination of the said tax. 25. A perusal of the said section 35(6) makes it clear that proper officer is empowered to determine the taxes payable and while determining the said tax payable he is bound to determine the same in accordance with the provisions of Sections 73 & 74 of the Act. 26. In the present case, the proper officer was empowered to determine the liability of payment of tax in terms of the powers conferred under Section 35 (6) after resorting to the procedure as established under Section 74 of the Act. Section 74 of the Act reads as under: Section 74 - Determination of tax not paid or short paid or erroneously refunded or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. (8) Where any person chargeable with tax under subsection (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent. of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. (10) The proper officer shall issue the order under subsection (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund. (11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act, 2017 33. A perusal of the said section makes it clear that proper officer should have "reasons to believe" that there is any suppression of any transaction relating to supply of goods by the taxable person or as claimed or has claimed input tax credit in respect of entitlement or has indulged in contravention of the provisions of this Act or the Rules made there under to evade tax under this Act, or such person is keeping his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act. 34. In the present case, as the petitioner has not challenged the seizure order, I am not going to the said question in the absence of any pleadings or the arguments advanced or document produced in respect of the same. Levy of Penalty under Section 122 35. Finally reverting to provisions of Section 122 under which the penalty has been imposed upon the petitioner. Section 122 as reproduced hereinabove provides for imposition of penalty for certain offences. The infractions which can be the basis for imposing penalty can be broadly categorised in two types Column A Column B (i) supplies any goods or services or both without issue of any invoice or iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by using the registration number of another registered person; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; (xx) tampers with, or destroys any material evidence or document; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; (xv) suppresses his turnover leading to evasion of tax under this Act; 36. The amount of penalty imposable is provided under Section 122 (xxi), which provides that the quantum of penalty imposable is Rs. 10,000/- or an amount equivalent to tax evaded or tax not deducted under Section 51 or short deducted or deducted but not paid to the Government or tax not calculated under Section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher. 37. Thus, from a plain reading, it is clear that the penalty imposable for the offences specified in 'Column A' above is Rs. 10,000/- or the "amount of tax evaded" whereas for the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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