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TMI Blog2021 (4) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter also referred to as "the adjudicating authority") in the case of M/s Tirupati Plywood Industries, A-54, A-54A, Shree Khatu Shayamji Industrial Area, Reengus, Distt-Sikar-332 404 (Raj) (hereinafter referred to as the respondent). 2. Brief Facts of the case :- 2.1 The officers of the Directorate General of GST intelligence, Jaipur Zonal Unit, C-62, Sarojani Marg, C-Scheme, Jaipur-302001 (hereinafter referred as "DGGI") under the authority of Search Warrant dated 27.06.2019, issued by the competent authority conducted the search at M/s Tirupati Plywood Industries, A-54, A-54A, Shree Khatu Shayamji Industrial Area, Reengus, Distt-Sikar-332 404 (Raj) on 27/28.06.2019 in presence of two independent witnesses, namely Sh. Gajendra Singh and Sh. Ramswroop Agarwal, and Sh.Shankar Lal Choudhary, Manager of M/s TPI and Sh. Parveen Goyal, Partner one of the Partners of M/s TPI. During the course of search the officers, inter alia, carried out the physical stock verification of finished goods i.e. ( Flush Doors and Board), against stock of finished goods, valued for ₹ 92,94,810/-found inexcess of the recorded stock in violation of Section 35 of the CGST Act,2017 read with Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the factory premises of the Noticee. 2.4 Since the partner and manager of the assessee could not produce any documents or records related to the finished goods found in the premises, therefore, the visiting officers, on a reasonable belief that the finished goods namely 'Flush Door' and 'Block Board' of quantity 4310.28 Sq Mtr. and 10591.75Sq. Mtr. valued at ₹ 30,57,418/- and ₹ 62,37,392/- respectively, which were liable to tax under the CGST Act, 2017, and kept unaccounted, with intent to supply the same clandestinely and without payment of tax, to evade payment of CGST/SGST, and hence liable to confiscation under Section 130 of the Central Goods and Services Tax (CGST) Act, 2017, seized the said goods under Section 67of the CGST Act, 2017 vide GST INS-02. The seized goods were given under the order of prohibition to Sh. Parveen Goyal, Partner of M/ s TPI under vide GST INS-03 dated 28.06.2019. 2.5 It has also been alleged in the notice that Shri Parveen Goyal, Partner of M/ s TPI, who also looks after day-to-day affairs of the firm, had consciously and deliberately indulged in activities of clandestine clearance/supply of taxable goods as he was fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST- ₹ 16,343.00 + SGST- ₹ 16,343.00)under section 73 of the CGST Act 2017, and ordered to recover from M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar; (iii) Ordered for recovery of interest on the tax ₹ 32,686.00 under section 50 of the CGST Act 2017; (iv) Imposed penalty of ₹ 32,686.00 i.e. equal to the amount of tax evaded under section 74(1) of the CGST Act 2017 on M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar. However, given an option to the assessee to pay the penalty fifty percent of the tax determined, under Section 74(11) of CGST Act 2017, if the tax and interest payable thereon along with reduced penalty are paid within stipulated time of 30 days from the date of communication of this order; (v)Imposed penalty of ₹ 25,000/- upon Sh. Parveen Goyal, partner of M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar; under Section 122(3)of the CGST Act, 2017. (vi)Since the goods seized were not liable to confiscation, do not imposed penalty upon M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar under Section 122(1)((x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake it on record as per issuance of sale invoice by doing back calculation which it selfead to ill-intent of the assessee to remove taxable goods clandestinely. Shri Shankar Lal Choudhary, Manager of M/s TPI in his statement dated 28.06.2019interalia admitted the clandestine clearance from the factory from which the motive to keep the goods un-accounted is made clear. Shri Praveen Goyal, Partner of the firm has stated that they have not maintained stock position in the factory since the month of March, 2019 and have not updated finished stock in their records since April, 2019 but they were continuously issuing sale invoices. From the above statements of Shri Makkhan Lal, Shri Shankar Lal Choudhary and admission of Shri Praveen Goyal, Partner during pachanama proceeding followed by his admission in his statement dated 28.06.2019, it is very clear that the action of non maintenance of record was modus-operandi of the taxpayer for manipulating the accounts/records to evade the GST which itself indicate assessee's mens-rea. [B] The adjudicating authority has erred in holding that the DGGI did not ask any question from Shri Praveen Goyal regarding reducing the value of goods to40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 174 of the CGST Act, 201 7. The seizure was correctly made as per situation where all conditions required to seize taxable goods provided under relevant provisions were fulfilled. [E] In para 5.14 of the impugned OIO dated 27.01.2020, the Adjudicating Authority has erred in holding the goods deserved to release as the same is not liable to confiscation on the ground that statements of Shri Lalit Goyal were never recorded to find out the pricing pattern of the seized goods. As a matter of fact physical stock verification of the goods was conducted in presence of independent witnesses and Manager, Accountant and Partner of the Firm. Statements were also recorded wherein they all admitted the pricing pattern of the firm in their voluntarily tendered statement. Hence, conclusion drawn by the adjudicating authority that value worked out is unreasonable is not correct. Further, on the basis of valuation, it is incorrect to hold by the adjudicating authority in para 5.14that flush doors & boards valued ₹ 92,94,810/- seized vide GST INS-2 dated28.06.2019 is not liable to confiscation and deserved to be released. Only on the basis of valuation parameters (which is already accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of accountant and statement of partner, the adjudicating authority, in the OIO repeatedly mentioned that another partner of TPI, Shri Lalit Goyal have not been examined by the intelligence unit. However, the authority never called officers of DGGI to examine them or to cross check the submission made by the noticee. Therefore, arbitrary findings of the adjudicating authority, despite sufficient evidences narrated by the department in the subject show cause notice, are bad in law. [I] That the seizure of goods were made on the basis of reasonable belief that the goods found unaccounted are liable for confiscation and these facts were admitted by the partner, accountant and manager of the firm. Whereas, in para 5.4 of the OIO, the adjudicating authority, in contrary to the law has held that if the department had allowed the assessee to complete its books of accounts it could have been proved at that time only that there was no excess stock of goods as compared to stock as per books of accounts. [J] That the adjudicating authority has grossly erred in finding made in para 5.14of the impugned order regarding pricing of the goods which was duly adopted by the revenue on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found in search. Due to nonadherence, the factual position was not taken by the visiting officers as the assessee could not update/complete the books and consequently could not tell the position of stock as on the date of search. Thus, the intelligence team without giving any opportunity to update/complete the books of accounts, seized the entire goods of finished stock treating it as uncounted stock kept for clandestine supply, whereas the same was not un-accounted. A.2. The Department in its Appeal has stated that the registered person at his principal place of business shall keep and maintain a true and correct accounts as per Section 35(1) of the CGST Act,2017 and Rule 56(2) of the CGST Rules,2017. However, the taxpayer has failed to maintain the account of stock in respect of goods received and supplied by him for the long time i.e. period of more than one month. That as per the Panchnama of the accountant of the firm they update production and take it on record as per the issuance of sale invoices by doing back calculation which itself lead to the ill-intent of the assessee to remove taxable goods clandestinely. Hence it is very clear that the action of non-maintenance of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual position. Hence on the basis of the statement of the accountant and manager of the assessee it can not be alleged that there was illintent of the asssesee in keeping the goods un accountaed for the clandestine removal of such goods. More particularly when the document related to production, purchase and sale were found during search and the assessee requested to allow them to complete the books of accounts on the basis of documents found. Further so far as department's contention that the facts disclosed by the accountant and manager of the assessee admitted by the Partner Sh. Parveen Goyal is concerned, it is submitted that Shri Praveen Goyal could not understand the question in correct perspective.It is to be noted that Sh. Parveen Goyal after the search proceedings, vide his letter dated 11.07.2019 has submitted that their books of accounts were incomplete as the entries of the production was pending to be passed in the books of accounts for certain period but now the entries in the books of accounts have been completed from the available information and also submitted the details of the stock as per the books of accounts which broadly matched with the physical stock found a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords seized, the assessee completed the entries in the books of accounts considering the opening stock, purchases, consumption of raw material during the period, production on the basis of production sheet and sales made of the finished goods during the period 01.04.2019 to 27.06.2019.After completing the books, the assessee submitted the details of the book stock vide letter dated 11-7-19 to the Intelligence unit and requested to release the goods. However, the Intelligence unit did not consider the request and asked to make request for provisional release of the seized goods with the Jurisdictional officer in CGST Commissionerate. A.7. After search and after obtaining photocopies of the records seized during search, the assessee completed its books of accounts and supplied the details of the stock as per updated books to the Intelligence unit vide letter dated 11- 7-19. A.8. On completion of the books of accounts from the bills, production records found in search, it is noticed that the stock of goods as per books of accounts on the date of search is slightly higher than the physical stock taken by the search team of Intelligence unit. For verification of above the assessee pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating authority held that "I do not found any evidence which has been adduced in the notice to establish and arrive at a logical conclusion that the unaccounted/excess stock was deliberately kept unaccounted to supply the same clandestinely and without payment of tax". It is evident from the above facts that in addition of unaccounted stock of ₹ 92,84,810/- found during search, a stock of₹ 1,81,591/- already been cleared by them clandestinely. A.11 In this connection it is submitted that due to incomplete books of accounts at the time of search which was, also stated during search and requested to allow to complete the same but not accepted by the intelligence team, the assessee could not submit the actual position of book stock. It does not mean that the assessee has not accounted for the production and stock of the goods with intention to evade payment of GST and for the purpose of clandestine removal of those goods. The assessee at the time of search itself was having all the sales invoices and purchase invoices of the raw material which was resumed vide Annexure C during search. No evidence was found during search to prove that the assessee has made any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily production chart and gives it to the accountant of the assessee. He supervises the loading of goods from the factory as per the dispatch directions of partner Shri Parveen Goyal. After loading the goods, he prepares loading details and submits it to partner Shri Parveen Goyal for preparing invoice. The invoice is prepared by Shri Parveen Goyal as per the sale price and terms& Conditions finalised by his brother Shri Lalit Goyal. The accountant Shri Makkhan Lal is responsible for accounting work and he enters the invoice prepared by partner Shri Parveen Goyal in the books of accounts maintained in Tally software. Both these persons narrated these facts in their respective statements recorded at the time of search by the intelligence team. The sale price of the goods and the terms & conditions of sales is finalised by Shri Lalit Goyal who was out of India at the time of search. Therefore neither the partner Shri Parveen Goyal nor the accountant Shri Makkhan Lal nor the Manager Shri Shankar Lal are the relevant person to give any statement in respect of sale price/billing price of the goods. Hence no cognizance be given to the statement given by these persons at the time of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mentioned and if no enquiry is made then they should first make such enquiry from the market of the trade. The assessee is ready to furnish the cost price of the goods manufactured by them based on the standard of the industry and comparative market price of such goods manufactured by similar type of manufacturers. However, in the present proceedings the valuation part may not be so relevant since the goods found during search is verifiable with the stock as per books and there is no excess stock. A.15 In view of above, the release of goods vide OIO dated: 27.01.2020 by stating that statement of Shri Lalit Goyal who is in-charge of the supply and pricing of the goods were never recorded to find out the pricing pattern of the seized good sis correct. Further the Ld. A.C. has verified the updated books of accounts and considered the position of book stock as on the date of search before passing the OIO. Therefore, the order in review holding that the OIO dated 27-1-2020 is not proper and legal is incorrect. A.16 The department in its appeal has further contended that despite of having examined panchnama, GST-INS-02, statement of Manager, statement of accountant and statement of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of Board up to24.05.2019, which shows that findings by the adjudicating authority is far from the facts and incorrectly recorded. A.19 In this connection it is submitted that the assessee during the search was having all the relevant documents of the purchases and details of the production for the period under consideration and has requested the search team to allow them to complete the records. The search team did not allow the request of the assesse. Therefore the search proceedings the assesse submitted the details of the updated stock on the basis of the photocopies of documents seized by the Intelligence team at the time of search. As per the updated position, the stock was almost matched with the quantity found physically at the time of search. Considering above the adjudicating authority in its para 5 .12 has mentioned that the stock records were updated upto 21/24.06.2019. Therefore, there is no contradiction in the findings of the adjudicating authority and the ground of appeal is in correct and therefore the appeal is liable to be quashed. A.20 In view of above, the grounds in the departmental appeal that the goods found during search was excess unaccounted goods, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... around one month in relation to production entries but the details of the production was found in search. This cannot be viewed as failure to keep, maintain or retain the books of accounts. Had the search team would have provided opportunity to update/complete books of accounts, there would not have been any seizure of goods as the stock found during search is as per books of accounts. The assessee at the time of search was having all the purchase files containing all the relevant purchase invoices of the Raw Material, sales file containing all the sales Invoices of the finished goods and all the GST return filed during the period from 01.04.2019 to 27.06.2019. The law nowhere provides that all the entries should be posted in the books of accounts on the same day. Mere delay in posting the entries related to production in the books of accounts when all the relevant bill/vouchers and production details were available at the time of search, cannot be said to be failure to keep, maintain or retain books of accounts and other documents in accordance with provisions of the CGST Act. After the search the assessee has completed its books of accounts on the basis of documents/details found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are liable to confiscation is incorrect and contrary to the provisions of the Act. Therefore, the OIO dated: 27.01.2020 dropping the penalty is correct and the same be sustained. B.6 Rule 61 of the CGST Rules, provides the form and manner of the monthly return to be filed by the registered person. As per this rule monthly return in form GSTR-3Bwhich was brought by the legislature in lieu of GSTR-3 which is being filed regularly by the registered person. The details required as per the format of formGSTR-3B is being submitted regularly by the assessee. There is no requirement of form to submit the details of monthly production. The details of outward made by the assessee is regularly submitted in GSTR-3B. Thus, there is no violation of the provisions of Rule 61 of the CGST Rules. C. Statutory procedure prescribed for communication of Show-Cause Notice under Rule 142(1) of CGST Rules have not been followed. C.1. Without prejudice to above, it is submitted that the foundational show cause notice dated 23.12.2019 proposing seizure of the goods and alleging that the goods have been kept un-accounted for the purpose of clandestine removal of goods without payment of GST, was neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case envisioning the facts submitted by the appellant department as well as respondent. On going through the appeal memo, submission of cross objections and relevant records of the case, I find that the following issues to be decided in the instant case:- 1) Whether excess stock were found during the physical stocks verification against entries made in stock register and whether seized excess stocks are liable to be confiscated in terms of Section 130 of CGST Act, 2017 and Rule 139 of CGSGT Rules,2017 or not ? 2) Whether penalty is imposable upon the Firm/Assessee under Section 122(1)(xvi) and (xviii) of CGST Act, 2017 or not ? 3) Whether penalty is imposable upon Partner of the Firm under Section 122(3) of CGST Act,2017 or not ? Before embarking upon the issue it would be appropriate to reproduce the relevant provisions of Act and Rules made thereunder:- SECTION 130. Confiscation of goods or conveyances and levy of penalty. - (1) Notwithstanding anything contained in this Act, if any person - (i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (ii) does not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions of this Act or the rules made thereunder; (xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (2)………. (3) Any person who -- (a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1); (b) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (c) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (d) fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry; (e) fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account, shall be lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted or exported or of supplies attracting payment of tax on reverse charge along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers. (2) Every registered person, other than a person paying tax under section 10, shall maintain the accounts of stock in respect of goods received and supplied by him, and such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof. Now, I am taking up the issues one by one for discussion. Point No.(1) - With regard to issue involved at Point No.1, appellant/department has contended that adjudicating authority has erred in holding the seized goods deserved to release as the same is not liable to confiscation. Further, submitted that the adjudicating authority has also erred in holding that the unaccounted excess goods which were seized were not deliberately kept unaccounted to supply the same clandestinely and without payment of tax. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stock in writing to the investigating authority and requested to release the goods. However, investigating authority did not consider his request. Whereas, the adjudicating authority after verification of books of accounts and satisfied with the position of books of stock he released the goods. Hence the order in original releasing the goods is correct and same is to be sustained. On going through the both sides of submission, I observed 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since Customs Officers are not Police Officers - Section 108 of the Customs Act and FERA. Further, the Hon'ble Supreme Court in the case of Naresh J. Sukhawani v. Union of India reported in 1996 (83) E.L.T. 258 has also held that the statement recorded under Section 108 of the Customs Act, 1962 made before the Customs officials, is not a statement recorded under Section 161 of Cr.P.C. Therefore, it is a material piece of evidence collected by the Customs officials under Section 108 of the Customs Act, 1962 and it can be used as substantive evidence connecting the petitioners with the contravention of Customs Act. Since similar provisions has been provided in Section 70 of CGST Act, 2017 hence in view of above judicial pronouncement it may be concluded that 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 . In view of above, I do not agree with the contention of respondent and hold the plea of the appellant/department accordingly. Further, I find that adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m adopted by the Firm which has been admitted by the Accountant himself. Further, I am of the opinion that the value of the said excess goods can not be arrived on the basis of sale invoice issued by the respondent/assessee. From the statement of the Accountant it is clear that the price mentioned on sale invoices are undervalued upto 60% of the actual value price of sale. Therefore, value arrived by the Investigating Authority is correct and proper. Further, I also opined that recording of statement of the one of the Partner Sh.Lalit Goyal would have not served any purpose for arriving the value as it is very much clear that Kachha System were in place rather the proper recording of accounting systems to arrive the actual price of the goods. Thus, adjudicating authority has erred by holding that the seized goods is not liable for confiscation and release the same contrary to this view I find 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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