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TMI Blog2022 (1) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to decide the case on merits. Whether there was excess of stock of raw material and finished goods at the time of physically stock verification during search or not? - HELD THAT:- Both the key persons have categorically agreed that they do not maintain any stock register of raw materials and finished goods in the factory premises. Further, during physical verification, the departmental officers concluded the excess raw material and finished goods on the basis of purchase and sales invoices in the presence of the independent witnesses and Shri Girish Kumar Singhal, Manager of the appellant, who at the material of time were not able to produce the books of accounts as well as any plausible explanation thereof which is also obvious from the para 3 of the impugned order - the records of goods were not properly maintained/kept by the appellant and goods seized were duly accounted for in their respective books of accounts. The appellant have contravened the provisions of Section 35 of the CGST Act, 2017 and Rule 56 of CGST Rules, 2017. Therefore, adjudicating authority has rightly confiscated the said seized goods and accordingly imposed fine and penalty under the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the appellant in his order and he also examined all the cited case laws quoted by the appellant and observed that the said cited judgment are not squarely applicable in the present case. In view of above, the contention of the appellant is irrelevant and cannot be accepted. The order passed by the adjudicating authority is upheld - there are no infirmity in the impugned order - appeal dismissed. - 133-134 (MAA)CGST/JPR/2021 - - - Dated:- 1-6-2021 - Shri Manzoor Ali Ansari, Additional Commissioner (Appeals) ORDER These two appeals have been filed under Section 107 of the Central Goods and Services Tax Act, 2017 (hereinafter also referred to as the CGST Act ) by M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur-321 001 (Rajasthan) (hereinafter also referred to as the appellant No. 1 ) and Sh. Harendra Kumar Jain, Partner, M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur, (Rajasthan) (hereinafter also referred to as the appellant No. 2 ) against the Order-in-Original No. 02/GST/2020-21, dated 4-8-2020 and also corrigendum issued on 4-11-2020 (hereinafter referred to as the impugned order ) passed by the Assistant Commissioner, Central Goods and Services Tax Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79,920/- 22,378/- 2 Interlocking Tiles 100 mm 91175 pieces 12.5 11,39,688/- 2,05,144/- 3 Interlocking Tiles 80 mm 102078 pieces 10.93 11,15,713/- 2,00,828/- 4 Interlocking Tiles 100 mm (Red Color) 5,760 pieces 11.86 68,314/- 12,297/- Total 24,03,635/- 4,40,647/- The value of excess raw material finished goods as the result of physical stock verification was arrived at on the basis of purchase and sale invoices in presence of the independent witnesses and Shri Girish Kumar Singhal, Manager, M/s. MU on 24-3-2018. 2.4 The Panchnama dated 24-3-2018 (RUD-1) of the proceedings was drawn on the spot. The excess found goods were seized under Section 67(2) of the CGST Act, 2017 read with Rule 139 of the CGST Rules, 2017 in Form GST INS-02, dated 24-3-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g asked about the non-accounting of stock their books of accounts/records he could not put forward any plausible reply for the non-accountable of these in their books of accounts/records He admitted that they did not keep the records at their principal place of business. However, he stated that the goods seized were accounted for in their records, but the record was not readily available at the business premises at the time of search as they were with their accountant for reconciliation purpose and updation of record of sale and purchase. This, however, appears to be an afterthought. 2.9 The goods seized by the DGGI officers were released on provisional basis by the office of the Assistant Commissioner, Goods Services Tax Division F, Bharatpur-321001 vide F. No. V(30)Mahaveer Udyog/Seizure/8/BTP/18-19/544, dated 21-5-2018 (RUD-6) upon execution of the bond guarantee equivalent to applicable GST and penalty by M/s. MU. 2.10 M/s. MU were required to account for the impugned goods in their records as required under Rule 56 of the CGST Rules, 2017. They did not file monthly/periodically returns in respect of the said goods procured stored in their factory premises as required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 and the Rules made thereunder with an intent to evade payment of appropriate CGST/SGST, as discussed above. 4. Further, the adjudicating authority has passed the impugned order as under :- (i) Ordered for confiscation of raw material and finished goods valued at ₹ 24,03,635/- found unaccounted in the factory premises seized under 67(2) of the CGST Act, 20l7 read with Rule 139 of the CGST Rule, 2017. Given an option to M/s. Mahaveer Udhyog, Mai Godown Road, Bharatpur to redeem the confiscated taxable goods as aforesaid on payment of ₹ 10,00,000/-(Ten Lakh Rupees) as redemption fine in lieu of confiscation. (ii) Imposed a penalty of ₹ 4,40,647/- (Four Lakh Forty Thousand Six Hundred and Forty Seven Rupees) and ₹ 25,000/- (Twenty Five Thousand Rupees) on M/s. Mahaveer Udhyog, Mai Godown Road, Bharatpur under Section 122 and 125 of CGST Act, 2017 respectively. (iii) Imposed penalty of ₹ 25,000/- (Twenty Five Thousand Rupees) on Shri Harendra Kumar Jain, Partner, M/s. Mahaveer Udhyog, Mai Godown Road, Bharatpur under Section 125 of the CGST Act, 2017. 5. Being aggrieved with the impugned Order-in-Original No. 02/GST/2020-21, date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He bluntly denied the submissions of the appellant and order for confiscation and imposed heavy redemption fine penalties on the appellant for procedural lapse. The adjudicating authority ignored all the evidences submitted by the appellant in support of their contention. (A.4) From the above, it is absolutely clear that the appellant never intended to evade tax and all the goods of M/s. Mahaveer Udyog were duly accounted for at the factory premises . The adjudicating authority did not follow the principle of natural justice by ignoring the evidences submitted by the appellant. Evidences discussed above confirm the contention of the appellant. It is a technical mistake that the appellant could not produce the records of stock at the time of search, as part time accountant was not present. Thus, the confiscation of the entire goods is very harsh on the appellant. In light of the facts and evidences discussed above, the impugned Order-in-Original deserves to be set aside. (B) THE ALLEGATION FOR NON-ACCOUNTAL OF INTERLOCKING TILES CEMENT ARE WRONG AND DENIED - INTERLOCKING TILES - The seized interlocking tiles (pcs) had not attained finality, hence not liable for conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea of the appellant and this action of the department caused heavy financial losses to the appellant. Further, the adjudicating authority also ignored all the evidences submitted by the appellant and confirmed the allegations. This unjustifiable approach in deciding the matter and ignoring the plight of the appellant has extended huge losses to the appellant. (B.4) The appellant put forth the facts before the officers of DGGSTI at the time of search, but they did not acknowledge the fact, which was verifiable on the spot. The plight of the appellant totally ignored by the adjudicating authority as well as, despite the fact that the appellant submitted various evidences in support of their contention. (B.5) In the impugned Order-in-Original the Learned Adjudicating Authority very unjustifiably held that, the stock was not being maintained at factory premises with intent to evade CGST/SGST. (B.6) The observation of the Learned Adjudicating Authority is not justifiable as he has not discussed the submissions made by the appellant. Though, the adjudicating authority has accepted that there was a procedural lapse. (B.7) In light of the facts, it is implored that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things : Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer : Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act. (C.1.2) Rule 39 of the CGST Rules, 2017 stipulates that - 39. for distribution of input tax credit by Input Service Distributor. - (1) An Input Service Distributor shall distribute input tax credit in the manner and subject to the following conditions, namely, - . (C.1.3) Section 130(1)(ii) 130(iv) of the CGST Act stipulates that, - 130.(1) Notwithstanding anything contained in this Act, if any person - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace is keeping goods which have escaped payment of tax or kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, None of the reasons as discussed above were there for processing search of the premises. Neither there was any suppression, nor excess availment of credit, nor any intent to evade tax, nor any intent to escape tax and nor any such documentation to evade tax. Further, after search proceedings carried out under Section 67(1), the goods can be seized under Section 67(2) if there is reason to believe that the goods are confiscable under the Act. In the SCN, it has been alleged that the goods which were lying at factory can be confiscated under Section 130(1)(ii) . 130(1)(iv) of the Act ibid, read with Rule 139 of the Rules ibid. In the SCN the provisions of Section 130(1)(ii) 130(1)(iv) of the Act ibid, read with Rule 139 of the Rules ibid have been wrongly invoked. (C.3) Section 130(1)(ii) stipulates that the goods can be confiscated if the taxable person does not account for any goods on which he is liable to pay tax under this Act. However, the appellant were duly accounting all the inputs and finished goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 125 it is evident that the penalty is imposable if there is intent or mens rea on the part of appellant to evade the tax. However, in the matter, there had neither been any intent of the appellant to evade the tax and nor the investigation has put forth any evidence in respect of intent of the appellant. Moreover, the SCN has also alleged procedural lapse only. Merely non-production of records of stock at the time of search, cannot be made a lawful allegation to invoke provisions of referred sections of the Act. (D.3) Without prejudice to the submissions earlier made, it is submitted that it is an undeniable fact that the appellant neither suppressed any fact from the department nor there has been any intentional contravention of the provisions of the Central Goods Services [Tax] Act, 2017 or the rules made thereunder with intent to evade payment of duty. The appellant were regularly filing periodical returns under the Act ibid Rules made thereunder, which carried all the information in respect of purchase sales of the appellants. This sufficiently proves that there has not been a mens rea on the part of the appellant. (D.4) Further, without prejudice to submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 122 on M/s. MU, thus penal provisions of Section 125 are not invocable in the present case. (E.3) Thus, the Learned Adjudicating Authority has wrongly imposed the penalty on Shri Harendra Kumar Jain, partner under Section 125 of the CGST Act, 2017. Hence the imposition of penalty under Section 125 of the CGST Act, 2017 on Shri Harendra Kumar Jain are clearly unsustainable. (F) PENALTY ON PARTNER OR PROPRIETOR IS NOT IMPOSABLE IF IT IS IMPOSED ON FIRM - (F.1) In the impugned Show Cause Notice penalty under Section 122 and Section 125 of the Central Goods and Services Tax Act, 2017 has also been proposed on the firm, thus proposing penalty on the partner/proprietor separately under Section 125 is not justified as there has neither been any such direct allegation on Shri Harendra Kumar Jain nor the firm is a separate legal entity. (F.2) Moreover, the penalty under Section 122 and Section 125 of the Central Goods and Services Tax Act, 2017 has been proposed on the firm, thus proposing penalty on the proprietor separately under Section 125 is not justified as the partnership firm is not a separate legal person in the eyes of law. (G) JUDICIAL DISCIPLINE IS REQUIRED T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their support : Commissioner of Central Excise, Chandigarh v. Pepsi Foods Ltd. reported at 2010 (260) E.L.T. 481 (S.C.), Commissioner of Sales Tax, UP v. Sanjiv Fabrics reported at 2010 (258) E.L.T. 465 (S.C.), Vinod Kumar Gupta v. CCE [2012-TIOL-324-HC-P H-CX = 2013 (287) E.L.T. 54 (P H)] South Central Railway Employees Co-operative Credit Society Employees Union v. B. Yashodabai and Others [(2015) 2 SCC 727)] Union of India v. Topland Engines Pvt. Ltd. - 2010 (253) E.L.T. A17 (S.C.), IDL Industries Ltd. v. Commissioner of Central Excise Customs reported at 2016 (337) E.L.T. 496 (S.C.) Commissioner v. Jain Vanguard Polybutlene Ltd. - 2015 (326) E.L.T. A86 (S.C.), Birla Corporation case [2005 (186) E.L.T. 266 (S.C.)] Kamakshi Tradexim (India) Pvt. Ltd. v. Union of India - 2017 (351) E.L.T. 102 (Guj.) Mycon Construction Ltd. v. Union of India - 2017 (350) E.L.T. 514 (Bom.) Padmavati Tubes v. Commissioner of Central Excise Service Tax, Vapi - 2017 (351) E.L.T. 38 (Guj.) Ram Pratap v. Union of India - 2017 (350) E.L.T. 375 (P H) M/s. Synergy Fertichem Pvt. Ltd. v. State of Gujarat, reported as in SCA No. 4730 of 2019 vide judgment dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. (2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things : Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorized by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Section 125 of the CGST Act, 2017 - Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees. (E) SECTION 130. CONFISCATION OF GOODS OR CONVEYANCES AND LEVY OF PENALTY. - (1) Notwithstanding anything contained in this Act, if any person - .. (2) Whenever confiscation of any goods is authorized by this Act, the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to accept the same and proceeded to decide the case on merits. (b) In respect of issue at S. No. (b) - I find that during search conducted on 24-3-2018, at the factory premises of the appellant and at the residence of the partners of M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur certain incriminating documents/records relevant to the investigation indicating evasion of CGST/SGST were recovered and seized. Further, the physical verification of stock of raw material and finished goods i.e. Cement Bags and Interlocking Tiles valued at ₹ 24,03,635/- was also carried out by the DGGI officers in the presence of two independent witnesses and Shri Girish Kumar Singhal, Manager of M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur. During physical stock verification an excess stock of Cement Bags and Interlocking Tiles valued at ₹ 24,03,635/- were found as the appellant did not maintain any stock register of raw material and finished goods. The excess found goods were seized under Section 67(2) of the CGST Act, 2017 read with Rule 139 of the CGST Rules, 2017. I also find that the adjudicating authority has confiscated excess stock of Cement Bags and In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharatpur and had agreed to the facts stated by Sh. Girish Kumar Singhal, Manager. On being asked about the non-accounting of stock in their books of accounts/records as well as related documents he also admitted that they did not keep the records at their principal place of business. However, afterwards the appellant has contested that at the time of search the goods seized were duly accounted for in their respective books of accounts, and copies of which were subsequently produced before the DGGI officers on 12-9-2018. The appellant further submitted that they are small scale manufacturer and had engaged a part time accountant to maintain books of accounts and records of stock and at the time of search of the DGGSTI on 24-3-2018, the part time accountant was not available and he had inadvertently took the records on preceding evening along with him for reconciliation purpose and it was merely a bona fide technical error and that is why the appellant could not produce the stock record at the time of search. However, I find that as per Section 35 of the CGST Act, 2017, every registered person is entrusted to keep the books of accounts at his principal pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has failed to produce the related documents, and also failed to keep account of stock in their factory premise thereby violating/contravening the Section 35 of CGST Act and Rule 56 of CGST Rules. Thus, I find that the excess/difference in stock found during physical stock verification was meant for clandestine removal with intention to evade the CGST/SGST. Therefore, for failure to keep and non-maintaining of records in respect of the excess stocks as well as non-filings of monthly/periodically returns with intent to evade tax, the adjudicating authority has properly imposed penalty under Sections 122(1)(xvi) and (xviii) and 125 of CGST Act, 2017. Further, the appellant contended that penalty under Section 122 and 125 of the CGST Act, 2017 has been proposed on the firm, thus proposing separate penalty on the partner under Section 125 of the CGST Act, 2017 is not justified. In this context, on going through the Section 125 of CGST Act it may be seen that this particular penalty is imposable on the person who contravenes any of the provisions of this Act or any rules made thereunder. From the above discussion and findings and perusal of records, it has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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