ORDER

This appeal has been filed under Section 107 of the Central Goods and Service Tax Act, 2017 by The Assistant Commissioner(Review), CGST, Commissionerate, Alwar (hereinafter also referred to as “the appellant or department” also) in view of Order-in-Review No.96/Review/2020-21 dated 28.08.2020 passed by the Commissioner, Central Goods and Service Tax Commissionerate, Alwar under Section107(2) of the Central Goods and Service Tax Act, 2017against the Order in Original No.03/GST/Demand/2020 dated 27.01.2020 (hereinafter also referred to as “the impugned order”) passed by The Assistant Commissioner, CGST, Division-G, Sikar (hereinafter also referred to as “the adjudicating authority”) in the case of M/s Agarwal Sales, F1(a), 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 the premises of M/s Agarwal Sales, F1(a) Shree Khatu Shayamji Industrial Area, Reengus, Distt-Sikar-332 404 (Raj) holding GSTIN:08AMGPB3637G1ZA on 27.06.2019 in presence of two independent witnesses, namely Sh. Sultan Singh Meena and Sh. Jagdish, and Sh. Sunil Kumar Jha, Worker of M/s Agarwal Sales, F1(a) Shree Khatu Shayamji Industrial Area, Reengus, Distt-Sikar. During the course of search the officers, inter alia, carried out the physical stock verification of finished goods i.e. (Plywood, Veneered Panels, Flush Doors found), against stock of finished goods, valued for ₹ 4,32,333/-found in excess of the recorded stock in violation of Section 35 of the CGST Act,2017 read with Rule 56 of CGST Rules, 2017 and seized the same under Section 67(2) of the CGST Act,2017 read with Rule, 139 of the CGST Rules, 2017, vide Panchnama dated 27.06.2019and recorded in Annexure ‘A‘ to the Panchnama dated 27.06.2019. Later on, as the  said Annexure ‘A‘ to the Panchnama dated 27.06.2019, contained some clerical/calculation errors, a revised Annexure ‘A-1‘ was prepared on 19.12.2019. Sh. Mohit Bansal, Proprietor of the Firm in his statement dated 19.12.2019 admitted the above mistakes in Annexure ‘A‘ and endorsed the correctness of revised details of Annexure ‘A-1‘

2.2 During the Panchnama proceedings conducted on 27.06.2019, Shri Sunil Kumar Jha, could not produce any documents or records related to the goods found in the premises, therefore the visiting officers on reasonable belief that the goods valued ₹ 4,32,333/- was kept unaccounted with intent to evade payment of CGST/SGST by supplying the same clandestinely, hence liable to confiscation under Section 130 of CGST Act 2017, seized the same goods under Section 67 of the CGST Act 2017, as per the details given in the Form GST INS02 annexed to the Panchnama dated 27.06.2019. The seized goods were given under the Supurdagiof Shri Sunil Kumar Jha under GST INS03 for safe custody of the goods.

2.3 It has also been alleged in the notice that Shri Mohit Bansal Proprietor of M/ s Agarwal Sales, 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 found involved in acquiring, possession, removing, depositing, keeping, concealing, and dealing in goods, which he knew were liable to confiscation, and hence he rendered himself liable to penalty under Section122(3) of the Act ibid.

3. In view of above, the impugned notice dated 24.12.2019, was served upon the assessee and Sh. Mohit Bansal, Proprietor of the Firm, calling upon them to show cause as to why:

(i) the excess found goods valued at ₹ 4,32,333.00 as shown in Annexure ‘A-1’ to the notice, seized under Section 67(2) of the CGST Act,2017 read with Rule 139 of the CGST Rule,.2017 as detailed in GST INS-02 to Panchnama dated 27.06.2019 should not be confiscated under the provisions of Section 130 of the CGST Act,2017 read with Rule 139 of the CGST Rules,2017

(ii) penalty should not be imposed upon M/s Agarwal Sales, Fl(a) Shree Khatu Shyamji Industrial Area, Reengus, District- Sikar, Rajasthan, in terms of Section 122(1) (xvi) and(xviii) of the CGST Act,2017 for contravention of the provisions of the CGST Act,2017 and the Rules made there under with an intent to evade payment of CGST/SGST.

(iii) penalty should not be imposed upon Shri Mohit Bansal Proprietor of M/ s AS, under Section 122(3) of the CGST Act,2017 for his act of omissions and commissions.

4. Further, the adjudicating authority vide the impugned Order in Original No.03/GST/Demand/2020 dated 27.01.2020 has passed an order as under:-

(i) Ordered to release the goods seized under GST INS 02 valuing ₹ 2,74,767.00(revised value) under GST INS 05;

(ii) Ordered to confiscate the goods under Section 130(1) of the Act, read with Rule 139 of the Rules, valuing ₹ 76,275.00, found unaccounted and seized under GSTINS 02. However given an option to release the same under GST INS 05, on payment of redemption fine ₹ 25000.00 under Section 130(2) of the CGST Act 2017; The goods so released should be taken into account and can be cleared only after payment of appropriate tax;

(iii) Confirmed the demand of ₹ 25,624.00 (CGST ₹ 12812.00 + SGST ₹ 12812.00) under section 73 ofthe CGST Act 2017, and ordered to recover from M/s Agarwal Sales, F 1 (a) Shree Khatu Shyamji Industrial Area, Reengus, Sikar, Rajasthan -332404;

(iv) Ordered for recovery of interest on the tax of ₹ 25,624.00 under chargeable section 50 of the CGST Act 2017;

(v) Imposed penalty of ₹ 13, 730. 00 (i.e. equal to the tax 18% of the value ₹ 76275.00) on M/s Agarwal Sales, Fl (a) Shree Khatu Shyamji Industrial Area, Reengus, Sikar, Rajasthan-332404, under Section 122(1) of the read with Section130(1) CGST Act, 2017;

(vi) Imposed penalty of₹ 25,624. 00 i.e. equal to the amount of tax evaded under section 74(1) of the CGST Act 2017 on M/s Agarwal Sales, Fl (a) Shree Khatu Shyamji Industrial Area, Reengus, Skar, Rajasthan – 332404. However, I give an option to the noticee 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;

(vii) Imposed penalty of ₹ 25000.00 on Shri Mohit Bansal Proprietor M/s Agarwal Sales, F 1 (a) Shree Khatu Shyamji Industrial Area, Reengus, Sikar, Rajasthan -332404, under Section 122(3) of the CGST Act, 2017;

5. The competent authority i.e. Commissioner, Central Goods and Service Tax Commissionerate, Alwar vide their Order-in-Review No.94/Review/2020-21 dated 28.08.2020 has reviewed the impugned Order in Original No.02/GST/Demand/2020 dated 27.01.2020 and found not proper and legal to the extent of not passing the order under Section 35 of the CGST Act, 2017read with Rule 56(2) of CGST Rules, 2017 and directed the Assistant Commissioner(Review), CGST Commissionerate, Alwar to file Appeal before the Additional Commissioner (Appeals), CGST, Jaipur within the stipulated period for determination of the correctness of the impugned order. The appellant also stated that application is being submitted in accordance with Notification No.55/2020- Central Tax dated 27.06.2020 amending Notification No.35/2020-Central Tax dated 03.04.2020.Accordingly, the appellant department filed this appeal on the following grounds:-

[A] That the adjudicating authority has erred m holding that the unaccounted / excess goods which were seized were not deliberately kept unaccounted to supply the same clandestinely and without payment of tax. Whereas as per Section 35(1) of the CGST Act,2017, 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. Further, as per Rule56 (2) of the CGST Rules, 201 7 ‘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.” However, during the course of search, the taxpayer has failed to produce any records related to the goods lying in the premises on the date of visit by DGGI officers dated 27.06.2019.

That Shri Mohit Bansal, Prop. of the firm during his voluntary statement dated 19.12.2019, has perused the panchnama dated 27.06.2019 and appended his signature in token of its correctness. Therefore, the action of taxpayer of non production of records related to the goods lying in the premises clearly indicates that the assessee has not maintained any stock register/documents. It was modus-operandi of the taxpayer for manipulating the accounts/records to evade the GST which itself indicate assessee’s mens-rea.

That Shri Mohit Bansal, Prop. of the firm vide his letter dated 13.12.2019 has admitted that the value of seized goods ₹ 5,20,586/-. Further vide their letter dated 23.12.2019, proprietor shri Mohit Bansal, has admitted that the value of seized goods is ₹ 4,32,333/-. The content of the letter dated23.12.2019 are reproduced as under:”

Kindly take reference of my letter dated 13.12.19 communicating therein correct calculations regarding goods seized on 27. 06.19 in my business premises during search by your office.

Sir I wish to submit that in the above letter, we have wrongly calculated the value of four panel door sheet and mica sheet by considering their unit in square meters whereas these two items are sold on per piece basis as such the contents of this letter 13.12. 19 are also incorrect and correct value has been communicated by me at the time of tendering my statement on 19.12. 19 before you according to which the value of seized goods comes to ₹ 4,32,333/-.

However, the adjudicating authority has ignored the admission and acceptance of value by the proprietor and arbitrarily re-determined the value of seized goods. Thus, the adjudicating authority has grossly erred in releasing of goods valued to ₹ 2,74,767/- while the taxpayer has already admitted the value of seized goods as ₹ 4,32,333/-.

[D] That on being asked about not keeping of records in respect of unaccounted goods, Shri Mohit Bansal, Prop. of the firm in his voluntary statement dated 19.12.2019 tendered under Sections 70 & 174 of the CGST Act, 2017, has stated that most of these goods was their dead stock and he will try to submit detailed documents in support that the goods seized by the Department duly purchased by them under proper invoice. However, the taxpayer has not produced any documents regarding dead stock as well as purchase records. Since as the assessee has contended that most of these goods were dead stock, even then these goods should be part of their stock and have to be accounted for in their records until the same were write off from their accounts after reversal of Cenvat Credit so availed. It is therefore; very clear that the assessee did not have any records regarding the goods seized which were unaccounted and liable for seizure and confiscation.

6. The respondent vide letter No. APPL/JPR/CGST/AL/76/VIII/2020/ 3656 dated 28.12.2010 were called upon to file a memorandum of cross objection against the appeal, within 45 days of receipt of this notice, filed by the department. The respondent submitted their memorandum of cross objection on 15.02.2021 which is as under:-

There is no excess unaccounted stock of the goods on the date of search and therefore seizure of goods is invalid.

A. l. At the time of search at the premises of assessee a worker named Shri Sunil Kumar Jha was present. During search when the search team enquired about the books of accounts of the assessee he told to the search team that the books of accounts are maintained by the accountant Shri Makahan Lal. The books of accounts of the assessee which was being maintained in tally software by the accountant was seized from the computer system of M/s Tirupati Plywood Industries Reengus as Shri Makahan Lal is the common accountant for both the firms. In these books all the entries related to purchase and sale in relation to stock items were posted and was complete upto the date of search. However, the search team has overlooked the fact and without considering the position of stock as per books, seized the entire stock found during search.

The Department in its appeal has contended that every registered person at his principal place of business shall keep and maintain a true and correct accounts of production of goods, inward and outward supplies of goods or services or both, stock of goods, input tax credit availed, output tax payable as per section 3 5(1) of the CGST Act, 2017 and Rule 56(2) of the CGST Rules,2017. However, during the course of search, the taxpayer has failed to produce any records related to the goods lying in the premise on the date of visit by DGGI officers dated: 27.06.2019.

In this connection it is submitted that the books of accounts of the assessee was seized during search which is maintained in the tally software in the computer system lying at the premises of M/s Tirupati Plywood Industries. In these books all the entries of purchase and sale were posted upto date of search.

The search team has however not considered the above position of stock as per books and seized the entire stock treating it as unaccounted excess stock which is incorrect and invalid.

From the above it can be noted that in case of flush door, four panel door the stock as per books is more than that found during search. However, in case of Mica Sheet and firewood the stock found physically was slightly more than the stock as per books. The difference between the book stock and physical stock found during search is due to inaccurate stock taking / normal handling loss. Hence the stock found during search is not excess/unaccounted as alleged in the show cause notice. Therefore, the seizure of entire stock is invalid and consequently no question of confiscation of such goods arises. Hence, the 0I0 is correct in releasing the goods valued ₹ 2,74,767/- and the same is to be sustained. Consequently, the Departmental Appeal is liable to be dismissed.

The Department in its Appeal has further contended that Shri Mohit Bansal, Proprietor of the assessee firm in his voluntary statement dated: 19.12.2019 has perused the panchnama dated: 27.06.2019 and appended his signature in token of its correctness. Therefore, the action of taxpayer of non production of records related to the goods lying in the premises clearly indicates that the assessee has not maintained any stock register/documents. It was modus-operandi of the taxpayer for manipulating the accounts/records to evade the GST which itself indicate assessee’s mens-rea.

In this connection it is submitted that in Panchnama dated: 27.06.2019 the Intelligence unit has asked Shri Sunil Kumar Jha, worker of the assessee for physical verification of stock. Shri Sunil Kumar Jha in the said panchanama has informed to the Intelligence team that he do not know about any purchase and sale invoice of the said stock and also do not know the value of stock. On the basis of such reply by Shri Sunil Kumar Jha the Intelligence unit has considered the entire stock as kept for clandestine supply and seized the said stock found at the time of search. It is to be submitted further that the intelligence unit has not found any evidence/proof from which it can be proved that the assessee has kept the said goods for clandestine supply.

It is further submitted that Shri Sunil Kumar Jha, worker of the assessee has nothing to do with the purchase and sale invoice and the value of the stock. The appropriate person is either the accountant Shri Makkhan Lal or the Prop. Shri Mohit Bansal who could explain about the invoices of sale and purchase and the value of the stock. The intelligence unit at the time of search has not asked anything from the accountant and proprietor of the assessee in relation to the documents and value of purchase/sales. Hence on the basis of the statement of Shri Sunil Kumar Jha, worker of the assessee who is not aware about the actual facts it cannot be considered that the assessee has kept the goods unaccounted for the purpose of Clandestine supply of the said goods. Further as submitted in earlier paras that the assessee has recorded the purchase/production of goods and sale of goods upto the date of search. Further the intelligence team at the time of search has not found any documents from which it can be proved that the assessee is indulged in the clandestine supply of the goods. In view of the above the Departmental Appeal contending that it is the modus-operandi of the assessee for manipulating the accounts/records to evade the GST is incorrect and the appeal is to dismissed.

Further the Intelligence unit in its Annexure-Al has valued the stock of Mica Sheet 0.6mm at ₹ 417/- per piece basis. This is without any basis. Shri Mohit Bansal proprietor in his voluntary statement dated: 19.12.2019 stated that he does not agree with the valuation of the Mica  Sheet 0.6mm. He submitted the copy of certain purchase invoices of the Mica Sheet, as per which the rate of Mica sheet is ₹ 180/200 per sheet. Therefore, the valuation made of the mica Sheet by applying rate of ₹ 417/- per piece is not acceptable. Since the assessee is trader and therefore in this case either the purchase rate of such Mica sheets to be taken or the rate can be enquired in the market. In any case the rate of 417/- taken by the search team of Intelligence unit is baseless and therefore not acceptable.

It is also contended in the departmental appeal that Shri Mohit Bansal, Prop. of the firm vide his letter dated: 13.12.2019 has admitted that the value of seized goods is ₹ 5,20,586/-. Further vide letter dated: 23.12.2019, proprietor Shri Mohit Bansal, has corrected the value of seized goods to ₹ 4,32,333/-. However, the adjudicating authority has ignored the admission and acceptance of the value by the proprietor redetermined the value of seized goods. Thus, the adjudicating authority has grossly erred in releasing goods valued to ₹ 2,74,767/- while the taxpayer has already admitted the value of seized goods as ₹ 4,32,333/

Further apart from the stock of goods mentioned above in paraA.3 there were certain items which was in damaged condition and was lying as scrap.

The above goods are in damaged /scrap condition and is having negligible realizable value. Being damaged goods the same was not part of the book stock. Since the above goods was not saleable as such in the market, it was lying in the premises to be used as firewood/ sale as scrap. Therefore, the above goods was not kept for the purpose of clandestine removal as alleged in the Departmental Appeal.

The Department in its Appeal has contended that on being asked about not keeping of records in respect of unaccounted goods, Shri Mohit Bansal, Prop. Of the firm in his voluntary statement dated: 19.12.2019, has stated that most of these goods was their dead stock and he will try to submit detailed documents in support that the goods seized by the department duly purchased by them under proper invoice. However, the taxpayer has not produced any documents regarding dead stock as well as purchase records. Since as the assessee has contended that most of these goods were dead stock, even then these goods should be part of their stock and have to be accounted for in their records until the same were write off from their accounts after reversal of Cenvat Credit so availed. It is therefore, very clear that the assessee did not have any records regarding the goods seized which were unaccounted and liable for seizure and confiscation.

In this connection it is submitted that the said goods was in damaged condition and not saleable in the market hence it was lying in the premise of the assessee as dead stock. The said damaged stock was purchased at the different point of time and in different different years and therefore the assessee was not able to link the purchase of said stock as the stock was in damaged condition lying in the premise of the assessee at the time of search. Further as the stock was dead /damaged stock of the assessee therefore the assessee has not kept the record of such stock in books of accounts maintained by the assessee. As the stock was dead stock, it was not saleable in the open market and therefore question of clandestine supply of such goods does not arises. Further merely on the basis of the fact that dead stock is not accounted for in the books of accounts, it cannot be concluded that the entire physical stock found during the search is kept unaccounted for the purpose of clandestine removal without payment of GST. Hence the departmental appeal considering the entire stock as unaccounted kept for clandestine supply is not correct and therefore the same is to be quashed.

Without prejudice to the above submission even if it is considered that the dead stock found during the search was liable to be confiscated then it is to be submitted that the adjudicating authority in its OIO dated: 27.01.2020 has already ordered for the confiscation of goods.

During search when the books of accounts of the assessee was seized by the search team of intelligence unit, they should have considered the stock as per books when the search on the assessee and another concern i.e. M/s Tiruptai Plywood Industries was on the same day and time and both the firms are located in the same area at Reengus. However, the search team did not consider the fact told to them that the books of the assessee is maintained at the computer lying in the premises of M/s Tiruptai Plywood Industries as the accountant of both the firms is common. Further the documents related to sale &purchase file and other documents of the assessee were also found and seized during search which was inventorised at serial no. 18,20,21,26,28,30,31 of annexure C of INS-02 of M/s Tirupati Plywood Industries. Thus, before seizure of the goods the search team should have considered the above documents and books found during search. However, they have not provided any opportunity to verify the stock as per books of the assessee even though the books and documents were found and seized during search itself. Such approach of the search team was unjustified and arbitrary and therefore the OIO dated:27.01.2020 is correct in releasing the goods.

It is further submitted that on the same day i.e. 27.06.2019, the same agency i.e. DGGI,JZU searched the premises of M/s Premier Plylam Marketing Co. VKI Area, Jaipur who is the dealer of the goods supplied by the assessee. As per panchnama prepared in case of M/s Premier Plylam Marketing Co., copy provided by them (PB 29-3) it is mentioned that partner of the firm Shri Ashish Gupta could not provide the updated data of stock of goods meant for supply as he stated that he was out of station and could not enter the0 purchase and sale invoices in their books of accounts/stock register. He also stated that he would update the sale and purchase stock register and intimate to the department and promised to comply the directive of the department in the matter. The search team on the basis of the statement /assertion of the partner of said firm has not seized the goods, though inventory was prepared after counting the physical stock lying at the premises. From the above it can be noted that the Intelligence unit allowed M/s Premier Plylam Marketing Co. to update/complete their books of accounts and submit the stock position as per books and did not seize their goods physically counted at the time of search. Whereas in the case of assessee the same Intelligence unit has took different stand and seized the entire stock found during search without considering the position of stock as per books. Thus, two different yardsticks was adopted by the Intelligence unit in search carried out on the same day which is not acceptable. Such differential treatment/approach of the intelligence team is uncalled for. This is violation of fundamental right of the assessee provided under Article 14 of the Constitution which provides principle of equality before law. This Principle has been grossly ignored by the Intelligence unit.

The stock as per books is verified from the books lying under seizure with the Intelligence unit. The assessee has submitted the following documents with the reply of SCN to the adjudicating authority for verification:

Audited balance sheet for the year ended 31-3-2019 showing position of closing stock as on 31-3-2019.

• Item wise ledger account of goods i.e. Flush door, Flush Door 30MM DC, Laminate Sheet and Timber showing details of opening stock, purchase and sales made during the period 1-4-2019 to 27-6-2019 as per the books seized during the search.

The ld. Adjudicating authority after verification with the books has arrived to the conclusion that there is no excess stock liable to be seizure and therefore it released the stock

So far as the value of stock is concerned, it is submitted that the correct value of stock seized is ₹ 3,51,042/-as stated by the adjudicating authority in its OIO dated27.01.2020 and by the assessee in its reply dated: 10.01.2020. However the goods seized was valued at ₹ 4,32,333/- as per the SCN but the stock of Mica was valued excessively and therefore the adjudicating authority has correctly valued at ₹ 3,51,042/- after verification of purchase bills. The release was made for the value of ₹ 2,74,767/- by the ld. Adjudicating authority in its OIO dated:27.01.2020 and the balance goods valued at ₹ 76,275/- was confiscated. Here the question is not of value but in quantity the stock was found short as mentioned above. Only certain items which are of damaged and dead stock was in excess for the reason that the same is having no realisable value and therefore, removed from the books. Hence there is no infirmity in the OIO releasing the goods and therefore, the departmental appeal is to be quashed.

Since there was no excess stock of the goods found during search and the proper records and documents have been maintained by the assessee, no penalty is leviable.

B.1. The department in its appeal has requested to quash the OIO dated: 27.01.2020 which drops the penalty stating that since the goods seized are not liable to confiscation, no penalty is to be imposed upon assessee under section 122(1) (xvi) and (xviii) of the CGST Act,2017.

B.2. In this connection it is submitted that the section in which penalty is proposed relates to failure to keep, maintain or retain books of accounts and other documents in accordance with the provisions of the Act and for supply, transport of the goods which are liable to be confiscated. The relevant provisions of the CGST Act are

reproduced here in below for ready reference:

Section 122 of the CGST Act, 2017; Penalty for certain offences:

122.(1) Where a taxable person who-(xvi) fails to keep, maintain or retain books of accounts and other documents in accordance with 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

No penalty is imposable on the proprietor Shri Mohit Bansal of the assessee firm under section 122(3).

C.1 The department in its appeal has requested to quash the OIO dated: 27.01.2020 which drops the penalty stating that since the goods seized are not liable to confiscation, no penalty is to be imposed upon Shri Mohit Bansal under section122(3) of the COST Act,2017.

C.2. In this connection it is submitted that Shri Mohit Bansal has not carried out any offence specified in section 122(3) and therefore no penalty can be levied on him. Though he looks after the day to day affairs of the firn but he was not deliberately indulged in activities of clandestine clearance/ supply of  goods. No excess stock was found of the entire stock items which was liable to confiscation and therefore no offence is proved on his part. Hence the charge of omission and commission on the Proprietor Shri Mohit Bansal of the assessee is not sustainable and therefore the proposed penalty on the Proprietor of the assessee is liable to be set aside.

C.2. Further as per the submissions made in the earlier paras it is clear that the assessee itself is not liable to penalty under section 122 of the COST Act, as the books of accounts of the assessee has been maintained and retained in the tally software on the system lying in the premise of M/s Tirupati Plywood Industries and the same are as per the provisions of the COST Act. Further the purchase and sale entries were posted upto the date of search in relation to the stock items as evident from Para A.3 above. Hence the charge of omission and commission on the Proprietor of the assessee Shri Mohit Bansal is also not sustainable.

D. Statutory procedure prescribed for communication of Show-Cause Notice under Rule 142(1) of CGST Rules have not been followed.

6. Personal hearing in the instant case in virtual mode through video conference was held on 22.03.2021. Sh. Virendra Porwal, Authorized Representative of the respondent appeared. During personal hearing he reiterated the submission of cross objections and explained in details.

7. From appellant/department side, none appeared for personal hearing and in this regard a letter dated 23.03.2021 has been received from Asstt Commissioner, CGST Division-Sikar therein it has been stated that due to technical reasons, this office was not able to attend the virtual hearing hosted on 22.03.2021 though link via Webex. It is further requested that the submission of this office may please be considered as submitted in appeal memo.

8. I have gone through the facts of the case as inscribed in the departmental appeal, the oral iteration offered by the department appellant in their appeal memo. Accordingly, I proceeded to decide 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 books of accounts/stock register maintained at the time of search and whether excess stock were found against the entries made in books of accounts/stock register at the time of search and whether seized goods is liable for confiscation or not in terms of Section 130 (1) (ii) (iv) of CGST Act and rules made thereunder ?

2) Whether value of seized goods are correct or not ?

3) Whether penalty is imposable upon the Firm/Assessee under Section 122(1)(xvi) and (xviii) 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 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 further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129 :

Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon.

(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

(4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard.

(5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government.

SECTION 122. Penalty for certain offences. -(1) Where a taxable person who –

(i) …….

(ii) …….

(iii) ……

(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;

(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 liable to a penalty which may extend to twenty-five thousand rupees.

SECTION 123. Penalty for failure to furnish information return.

-If a person who is required to furnish an information return under section 150 fails to do so within the period specified in the notice issued under sub-section (3) thereof, the proper officer may direct that such person shall be liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish such return continues :

Provided that the penalty imposed under this section shall not exceed five thousand rupees

SECTION 35. Accounts and other records.-(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.

RULE 139. Inspection, search and seizure. – (1) Where the proper officer not below the rank of a Joint Commissioner has reasons to believe that a place of business or any other place is to be visited for the purposes of inspection or search or, as the case may be, seizure in accordance with the provisions of section 67, he shall issue an authorisation in FORM GST INS-01authorising any other officer subordinate to him to conduct the inspection or search or, as the case may be, seizure of goods, documents, books or things liable to confiscation.

(2) Where any goods, documents, books or things are liable for seizure under sub-section (2) of section 67, the proper officer or an authorised officer shall make an order of seizure in FORM GST INS-02*.

RULE 56. Maintenance of accounts by registered persons. –

(1) Every registered person shall keep and maintain, in addition to the particulars mentioned in sub-section (1) of section 35, a true and correct account of the goods or services imported 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.

In respect of issue raised at point No.1 as mentioned above, the Appellant/department has submitted that the tax payer/assessee has failed to produce any records related to goods lying in the premises on the date of search. Whereas, in the submission of cross objection, the respondent/assessee has contended that the books of accounts was duly maintained in tally software in the computer system lying at the premises of M/s Tirupati Plywood Industries. In these books all the entries of purchase and sale were posted upto the date of search and the same was intimated by the worker of the assessee namely Sh.Sunil Kumar Jha to the search team. Further Sh. Sunil Kumar Jha also intimated to the search team that the books of accounts are maintained by the Accountant Sh. Makhhan Lal. However, the search team has overlooked the fact and without considering the position of stock seized the entire stock found during search.

On going through the submissions of both the sides, I find that there is no doubt that in fact the books of accounts of the assessee/respondent was not available in the premises of the assessee/respondent at the time of search in the respective premises and it was lying only in the premises of the other unit i.e. M/s Tirupati Plywood Industries, the same fact admitted by the assessee/respondent in his submission also. Therefore, I find that it was enough reason to believe to the search team to seize the goods which were lying at the search premises as the related records/ documents were not available. Whereas, as per Section 35 it is mandatory at the part of every registered person shall keep/ maintain the books of accounts and records at his principal place of business, as mentioned in the certificate of registration. However, from the above facts it is very much clear that the records were not available in the said premises. Therefore, it is clear violation of Section 35 of CGST Act with read Rule 56 of CGST Rules, 2017. Therefore, I do not find any force in the contention of the assessee/respondent that the records/books of accounts were maintained/kept by him. Contrary to this it is proved that assessee/respondent has failed to produce any records related to goods lying in the premises on the date of search. Further, I find that the investigating team has rightly seized the goods which were lying without any records which are required as per CGST and Rules.

Further, I find that the assessee/respondent has contended that the position of physical stock taken by the investigating team at the time of search was duly matched with the books of accounts. However, I find that the assessee/respondent themselves admitted in the later para of the same submission that the some quantity of goods were more against the books of accounts and he stated that the difference between the books of stock and physical stock found during search was due to inaccurate stock taking/normal handling loss. Hence, the stock found during search is not excess as alleged excess stock in the show cause notice. Therefore, seizure of stock of entire stock was invalid and consequently no question of confiscation is arise. Hence, the OIO is correct in releasing the goods valued to ₹ 2,74,767/- and the same is to be sustained.

In this regard, I find that the submission of assessee/respondent themselves contrary one hand he pleaded that the stock were not excess and on the other hand he submitted that stock found physically was slightly more than that as per records/books of accounts. Further, I find that the adjudicating authority has also observed in their OIO/findings that the excess stock was found and same is liable to seizure under Section 67 of CGST Act, 2017. In view of the said factual position, I find that the records/books of accounts were not properly maintained by the assessee/respondent. Hence excess goods found during the search proceedings was rightly been seized by the search team and the same is also liable to confiscation under Section 130 (1) (ii) and (iv) of the CGST Act, 2017. Therefore, I find that the adjudicating authority has grossly erred to release the said seized goods.

In view of above I hold that seized goods valued to ₹ 4,32,333/- is liable to confiscation in terms of Section 130 of CGST Act and rules made thereunder. Since, the goods has already been released by the adjudicating authority vide Order in Original No.03/GST/Demand/2020 dated 27.01.2020 therefore, I have no other option but to impose fine in lieu of confiscation of released goods under Section 130(2) of CGST Act, 2017.

In respect of issue raised at point No.2 as mentioned above the appellant/department has stated that the adjudicating authority has grossly erred in releasing of seized goods valued to ₹ 2,74,767/- while the assessee/respondent has already admitted the value of seized goods is ₹ 4,32,333/- and in support of their contention the appellant/department has submitted that the Proprietor of the Firm i.e. Sh. Mohit Bansal has himself admitted the value of seized goods vide his letter dated 13.12.2019 and 23.12.2019 the content of letter are as under:-

” Kindly take reference of my letter dated 13.12.19 communicating there incorrect calculations regarding goods seized on 27. 06.19 in my business premises during search by your office.

Sir I wish to submit that in the above letter, we have wrongly calculated the value of four panel door sheet and mica sheet by considering their unit in square meters whereas these two items are sold on per piece basis as such the contents of this letter 13.12. 19 are also incorrect and correct value has been communicated by me at the time of tendering my statement on 19.12. 19 before you according to which the value of seized goods comes to ₹ 4,32,333/-.‖

In this connection, the assessee/respondent has submitted categorically in his cross objection that the Proprietor Sh,Mohit Bansal had submitted the correct valuation of certain goods on the basis of quantity and type of measurement. However, in the later para he emphasized that the Proprietor of the firm Sh. Mohit Bansal had also submitted the copy of certain purchase invoices of Mica Sheet along with the said letters. As per which the rate of Mica Sheet is @ ₹ 180/- to 200/- per sheet therefore, valuation of Mica Sheet by applying rate of @ ₹ 417/- is not acceptable. Further, he submitted that the adjudicating authority has rightly taken the value of Mica Sheet @ ₹ 180/- per piece on the basis of purchase invoices submitted by him therefore the OIO is to be sustained.

In this context, I find that the assessee/respondent has taken the contradictory views here also he himself has admitted in their submissions that Proprietor has taken the correct valuation of the certain goods on the basis of quantity and type of measurement. Therefore, I find that assessee/respondent has largely accepted the valuation of the seized goods and only he has contended the valuation of Mica Sheet and adjudicating authority has arrived the valuation of mica sheet on the basis of some purchase invoices submitted by the assessee/respondent and accordingly he has revised the value of mica sheet in their findings. However, in this regard I find that the Proprietor of the Firm categorically admitted the value of seized goods vide above said two letters and he never raised any objection in respect of the value of the seized goods till the defence reply submitted against the show cause notice. Further, I find that the adjudicating authority has also arrived the value of mica sheet only on the basis of few purchase invoices and the date of purchase invoices is very far away from the date of the search proceedings. Therefore, I am of the opinion that the value of mica can not be arrived only on the basis of few invoices that too the date of invoices is nowhere nearby the date of search.

In view of above, I find that the adjudicating authority has ignored the admission/acceptance of value of Proprietor and he incorrectly re-determined the value of seized goods. Therefore, the adjudicating authority has grossly erred in releasing the seized goods by taking value amounting to ₹ 2,74,767/- instead of ₹ 4,32,333/- whereas the entire seized goods (considering the value ₹ 4,32,333/-) should have been ordered to be confiscated as the said seized goods were unaccounted in violation of Section 35 of CGST Act read with Rule 56 of CGST Rules, 2017.

Point No.(3)-

In respect of the issue mentioned at point No.3 the assessee/respondent submitted that since no excess stock found hence no penalty is leviable under Section 122(1) (xvi) and (xviii) of CGST Act, 2017. Further, he added that he has maintained the books of accounts as per provisions of the CGST Act. In this regard, I find that the detailed discussion on the issue of unaccounted/excess stock has already been pointed out at point No.1. In view of above discussions and findings, it has established that the assessee did not maintained the proper books of account at the time of search proceedings hence he violated the provisions of Section 35 of CGST Act and Rules made thereunder. Accordingly, I find that the penalty under Section 122(1) (xvi) and (xviii) of CGST Act, 2017 upon the assessee is very well attracted in the instant case.

Further in response to this office letter No. APPL/JPR/CGST/AL/76/VIII/2020/5004 dated 24.03.2021 concerned officer of the division has intimated vide his letter C.No.V- 19(44)Off/03/SKR/2020/825 dated 26.03.2021 that the assessee has deposited the following amount with respect to OIO No.03/GST/Demand/2020 dated 27.01.2020 the details are as under:-

i) Point No.(ii) & (vii) of Order Portion: ₹ 50,000/- deposited under CGST Act in ‘Others‘ category.

ii) Point No.(v) & (vi) of Order Portion ₹ 26,542/- (CGST Act ₹ 13271/- + SGST Act ₹ 13,271/-) deposited as a penalty.

As from the perusal of the content of the above letter, it has not been cleared that in which particular head the amount has been deposited. The payment particulars may be verified at the level of adjudicating authority and same may be appropriated.

In view of the above findings and discussions, I set aside the order in original passed by the adjudicating authority and pass the following order accordingly:-

1- I order for confiscation of the seized goods amounting to ₹ 4,32,333/- under Section 130 (1) (ii) & (iv) of CGST Act read with Rule 139 of CGST Rules, 2017. Since part of the seized goods (by considering the value of ₹ 2,74,767/-) has already been released vide the OIO No.03/GST/Demand/2020 dated 27.01.2020 hence I impose a fine of ₹ 1,00,000/-(Rupees One Lakh only) in lieu of confiscation of goods under Section 130(2) of CGST Act,2017. Fine of ₹ 25,000/- may be appropriated if it has already been paid by the assessee.

2- I impose a penalty amounting to ₹ 77,820/- (Rs. Seventy Seven Thousand Eight Hundred Twenty only) under Section 122(1) (xvi) and (xviii) of CGST Act upon M/s Agarwal Sales, F1(a), Shri Khatu Shyamji Industrial Area, Reengus, Distt-Sikar. However, since the adjudicating authority has imposed penalty amounting to ₹ 13,730/- in the said section hence if it has been deposited by the assessee, the same may be appropriated.

9. The appeal is disposed off in above manner.