Inspection, Search, Seizure and Arrest, Penalties, Demand and Recovery Under GST – Advanced Tax Laws and Practice Important Questions
Question 1.
Which are the applicable provisions for the purpose of recovery of tax short paid or not paid or amount erroneously refunded or input tax credit wrongly availed or utilized under CGST Act?
Answer:
Section 73 and Section 74 of the CGST Act, 2017 deals with the recovery of tax short paid or not paid or amount erroneously refunded or input tax credit wrongly availed or utilized.
In particular, Section 73 of the CGST Act, 2017 deals with the cases where there is no invocation of fraud/suppression/mis-statement etc. and Section 74 deals with cases where the provisions related to fraud/suppression/ mis-statement etc. are invoked.
Question 2.
Green & Green Private Limited has been issued a show cause notice (SCN) on 15th March, 2019 under section 73(1) of the CGST Act, 2017 on account of short payment of tax for the month of April, 2018. Green & Green Private Limited contends that the show cause notice so issued is time-barred in law. You are required to examine the technical veracity of the contention of Green & Green Private Limited in the context of provisions of the CGST Act, 2017.
Answer:
The show cause notice (SCN) under section 73(1) of the CGST Act, 2017 shall be issued at least 3 months prior to the time limit specified for issuance of order under section 73(10) and adjudication order under section 73(10) has to be issued within 3 years from the due date for furnishing of annual return for the financial year to which the short-paid/not paid tax relates to.
Thus, SCN under section 73(1) of the CGST Act, 2017 can be issued within 2 years and 9 months from the due date for furnishing of annual return for the financial year to which the short-paid/not paid tax relates to.
The SCN has been issued for the period April, 2018 which falls in the financial year 2018-19. Due date for furnishing annual return for the FY 2018-19 is 31-12-2019 and 3 year’s period from the due date of filing annual return lapses on 31-12-2022.
Thus, SCN under section 73(1) ought to have been issued latest by 30-9-2022, which in the given case, the notice has been issued on 15-3-2019, and therefore the same is in time. The contention of Green & Green Private Limited that the SCN is time barred is wrong.
Question 3.
(i) Deepak Garg started supply of goods within the state of Rajasthan from 1st December 2018. His turnover exceeded ₹20 lakh on 25th January 2019. However, he didn’t apply for registration. Determine the amount of penalty, if any, that may be imposed on Deepak Garg under CGST Act, 2017 on 31st March 2019, if the tax evaded as on said date, on account of failure to obtain registration is ₹8,000.
(ii) Kishore, an unregistered person under GST, purchases the goods supplied by Sanjay who is a registered person without receiving a tax invoice and thus helps in tax evasion. Determine maximum amount of penalty that may be imposed on Kishore under CGST Act, 2017.
Answer:
(i) Under section 122(1) of CGST Act, 2017 where a taxable person who is liable to be registered under this Act but fails to obtain registration, shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded whichever is higher.
Hence Deepak Garg is liable for penalty of ₹10,000
(ii) Under section 122(3) of the CGST Act, 2017 any person who aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1), he/she shall be liable to a penalty which may extend to twenty five thousand rupees. Hence, Kishore is liable for maximum penalty of ₹25,000 since he is helping in the tax evasion which is an offence under the CGST Act, 2017.
Question 4.
Mrs, Poomima started a business in supply of goods on 12-12-2017 at Salem, Tamil Nadu. During the year ended 31-3-2018, the details of the supplies effected at her Chennai office are as under:
(a) Supply of Taxable goods within the state: ₹16,00,000
(b) Supply of Exempt goods ₹5,00,000
She has not taken any GST registration. Determine the amount of penalty, if any, which may be imposed on her on 31-3-2018. In respect of taxable goods, SGST is 6% and CGST is 6%.
Note: Assume that she crossed the ? 20,00,000 limit on 25-1-2018.
Answer:
In given case, aggregate turnover of Financial Year 2017-18 is ₹21,00,000 (₹16,00,000 + ₹5,00,000). Where the aggregate turnover of a supplier making supplies exceeds ₹20 lakhs in a financial Year, he is liable to be registered under the Act of the concern state or union territory as the case may be. The said supplier must apply for registration within 30 days on which he becomes liable for registration.
However, in the given case, Mrs. Poornima became liable to registration on 25-1-2018, she did not apply for registration within 30 days of becoming liable to registration.
Section 122(1)(xi) of the CGST Act, 2017 enjoins that a taxable person who is liable to be registered under the CGST Act, 2017 but fails to obtain registration shall be liable to pay penalty of
(a) ₹10,000; or;
(b) An amount equivalent to the tax evaded. Whichever is higher.
In the given case, (b) is 12% of ₹1,00,000 i.e. ₹12,000. Hence a sum of ₹12,000 will be levied as penalty for failure to get himself registered.
Note:
GST is payable only when a person is registered/becomes liable to register under GST. Hence, GST liability in this case would arise only on Turnover beyond ₹20,00,000. Hence, it is computed on ₹1,00,000. It is assumed that all supplies after 25-1-2018 are taxable supplies.
Question 5.
Explain the concept of recovery in instalments under Section 80 of CGST Act 2017 giving the circumstances in which such facility can be allowed and will not be allowed to the defaulter.
Answer:
Recovery in instalments (Sections 80 of the CGST Act, 2017)
Commissioner can allow payment with interest by defaulter in monthly instalments not exceeding 24 instalments.
In case of default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due.
For seeking instalment facility, taxable persons can file application electronically in form GST DRC-20.
The instalment facility will not be allowed if:
The taxable person has already defaulted on the payment of any amount under GST law and recovery process is already undergoing;
The taxable person has not been allowed to make payment in instalments in the preceding financial year under GST law; and
The amount for which instalment facility is sought is less than ₹25,000.
Question 6.
What are the modes of recovery of tax available to the proper officer under GST laws?
Answer:
Section 79 of CGST Act, 2017 deals with the modes of recovery of dues. In terms of the said provision, the proper officer may recover the dues in following manner:
(a) Deduction of dues from the amount owned by the tax authorities payable to such person.
(b) Recovery by way of detaining and selling any goods belonging to such person.
(c) Recovery from other person, from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person.
(d) Distrain any movable or immovable property belonging to such person, until the amount payable is paid. If the dues not paid within 30 days, the said property is to be sold and with the proceeds of such sale the amount payable and cost of sale shall be recovered;
(e) Through the Collector of the district in which such person owns any property or resides or carries on his business, as if it was an arrear of land revenue;
(f) By way of an application to the appropriate Magistrate who in turn shall proceed to recover the amount as if it were a fine imposed by him;
(g) Through enforcing the bond/instrument executed under this Act or any rules or regulations made there under;
(h) CGST arrears can be recovered as an arrear of SGST and vice versa.
Question 7.
What is the meaning of the term “Search”?
Answer:
The term ‘search’ has not been expressly defined in the GST statutes. However, the powers of the GST officers to search any premises have been contained in section 67 of the CGST Act, 2017.
Section 67(2) of the CGST Act, 2017 provides that 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.
Further, section 67(10) of the CGST Act, 2017 provides that the provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.
Question 8.
What are the powers of the proper officer during the search?
Answer:
The officer authorised under to carry out inspection shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied. (Section 67(4) of the CGST Act).
Question 9.
Who can order for Search and Seizure under the provisions of CGST Act?
Answer:
An officer of the rank of Joint Commissioner or above can authorize an officer in writing to carry out search and seize goods, documents, books or things. Such authorization can be given only where the Joint Commissioner has reasons to believe that any goods liable to confiscation or any documents or books or things relevant for any proceedings are hidden in any place.
Question 10.
What is a Search Warrant and what are its contents?
Answer:
The written authority to conduct search is generally called search warrant. The competent authority to issue search warrant is an officer of the rank of Joint Commissioner or above. A search warrant must indicate the existence of a reasonable belief leading to the search. Search Warrant should contain the following details:
- the violation under the Act,
- the premise to be searched,
- the name and designation of the person authorized for search,
- the name of the issuing officer with full designation along with his round seal,
- date and place of issue,
- serial number of the search warrant,
- period of validity i.e. a day or two days etc.
Question 11.
What is the meaning of the term “Inspection”? Who can order for carrying out “Inspection” and under what circumstances?
Answer:
The term ‘Inspection’ has not been expressly defined under the GST statutes. However, section 67(1) of the CGST Act, 2017 provides that where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that
(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or
(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped 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.
Question 12.
What powers can be exercised by an officer during valid search?
Answer:
An officer carrying out a search has the power to search for and seize goods (which are liable to confiscation) and documents, books or things (relevant for any proceedings under CGST/SGST Act) from the premises searched. During search, the officer has the power to break open the door of the premises authorized to be searched if access to the same is denied.
Similarly, while carrying out search within the premises, he can break open any almirah or box if access to such almirah or box is denied and in which any goods, account, registers or documents are suspected to be concealed. He can also seal the premises if access to it denied.
Question 13.
Can a CGST/SGST officer access business premises under any other circumstances?
Answer:
Yes. Access can also be obtained in terms of Section 65 of CGST/SGST Act. This provision of law is meant to allow an audit party of CGST/SGST or C&AG or a cost accountant or chartered accountant nominated under section 66 of CGST/SGST Act, access to any business premises without issuance of a search warrant for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.
However, a written authorization is to be issued by an officer of the rank of Commissioner of CGST or SGST. This provision facilitates access to a business premise which is not registered by a taxable person as a principal or additional place of business but has books of account, documents, computers etc. which are required for audit or verification of accounts of a taxable person.
Question 14.
What is meant by the term ‘Seizure’?
Answer:
The term ‘seizure’ has not been specifically defined in the GST Law. In Law Lexicon Dictionary, ‘seizure’ is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wish of the owner of the property or who has the possession and who was unwilling to part with the possession.
Question 15.
What are the safeguards provided in GST Act(s) in respect of Search or Seizure?
Answer:
Certain safeguards are provided in section 67 of CGST/SGST Act in respect of the power of search or seizure. These are as follows:
(i) Seized goods or documents should not be retained beyond the period necessary for their examination;
(ii) Photocopies of the documents can be taken by the person from whose custody documents are seized;
(iii) For seized goods, if a notice is not issued within six months of its seizure, goods shall be returned to the person from whose possession it was seized. This period of six months can be extended on justified grounds up to a further period of maximum six months;
(iv) An inventory of seized goods shall be made by the seizing officer;
(v) Certain categories of goods to be specified under CGST Rules (such as perishable, hazardous etc.) can be disposed of immediately after seizure;
(vi) Provisions of Code of Criminal Procedure, 1973 relating to search and seizure shall apply. However, one important modification is in relation to sub-section (5) of section 165 of Code of Criminal Procedure – instead of sending copies of any record made in course of search to the nearest Magistrate empowered to take cognizance of the offence, it has to be sent to the Principal Commissioner/Commissioner of CGST/ Commissioner of SGST.
Question 16.
What is the lime limit for issuance of SCN in respect of seized goods?
Answer:
The SCN in respect of seized goods is to be issued within six months from the date of seizure of goods, otherwise the goods shall be returned to the person from whose possession they were seized. However, the period of six months, on sufficient cause being shown can be extended by the proper officer for a further period not exceeding six months. (Section 67(7) of the Act.)
Question 17.
When can the proper officer authorize ‘arrest’ of any person under CGST/SGST Act?
Answer:
The Goods and Services Tax Authorities are empowered under section 69 of CGST Act, 2017 to arrest persons accused of offences specified under Section 132 of the CGST Act, 2017 (‘CGST Act’). The Commissioner of CGST(Central Goods and Services Tax), by order, can authorize any CGST officer to arrest a person, if he has reasons to believe that such person has committed an offence specified in clause (a) or clause (b) or clause (c) or clause (d) of section 132(1) of CGST Act, 2017 which is punishable under H clause (i) or (it) of section 132(1) or section 132(2) of the CGST Act, 2017.
This essentially means that a person can be arrested only when the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds ₹1 Crore (imprisonment for a term up to 1 year with fine) or ₹5 Crores (imprisonment for a term up to 5 years with fine).
| Section of CGST Act | Offence |
| 132(1)(a) | Supply of any goods or services or both without issue of any invoice in violation of the provisions of the Act or Rules with intent to evade tax. |
| 132(1)(b) | Issue of any invoice or bill without supply of goods or services or both in violation of the provisions of the Act or Rules leading to wrongful availment or utilisation of input tax credit or refund of tax |
| 132(1)(c) | Availment of input tax credit using the invoice or bill referred to in clause (b) |
| 132(1)(d) | Collection of any amount of tax but failing to pay the same to the Government beyond a period of 3 months from the date on which such payment becomes due |
The word arrest usually comes within the realm of criminal jurisdiction. Offences can be classified into 3 major categories:
- Tax evasion
- Wrong/fraudulent availing of Input tax credit
- Wrong/fraudulent obtaining of Refund
The punishment for offences in Section 132(a), (b), (c), (d) of CGST, 2017 where the quantum involved is more than 5 crore is cognizable and non-bailable. All other offences with lesser quantum are non-cognizable and bailable.
If the Commissioner of CGST/SGST believes a person has committed an offence u/s 132 of CGST Act, he can be arrested by any authorised CGST/SGST officer. The arrested person will be informed about the grounds of his arrest. He will appear before the magistrate within 24 hours of arrest in case of cognizable offence.
Question 18.
What are cognizable and non-cognizable offences under CGST Act?
Answer:
In section 132 of CGST Act, 2017 it is provided that the offences relating to taxable goods and/or services where the amount of tax evaded or the amount of input tax credit wrongly availed or the amount of refund wrongly taken exceeds ₹5 crores, shall be cognizable and non-bailable. Other offences under the act are non-cognizable and bailable.
Question 19.
When can the proper officer issue summons under CGST Act?
Answer:
Section 70 of CGST/SGST Act, 2017 gives powers to a duly authorized CGST/SGST officer to call upon a person by issuing a summon to present himself before the officer issuing the summon to either give evidence or produce a document or any other thing in any inquiry which an officer is making.
A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.
Question 20.
What can be the consequences of non-appearance to summons?
Answer:
The proceeding before the official who has issued summons is deemed to be a judicial proceeding. If a person does not appear on the date when summoned without any reasonable justification, he can be prosecuted under section 174 of the Indian Penal Code (IPC).
If he absconds to avoid service of summons, he can be prosecuted under section 172 of the IPC and in case he does not produce the documents or electronic records required to be produced, he can be prosecuted under section 175 of the IPC. In case he gives false evidence, he can be prosecuted under section 193 of the IPC. In addition, if a person does not appear before a CGST/ SGST officer who has issued the summons, he is liable to a penalty up to ? 25,000 under section 122(3)(d) of CGST/SGST Act.
Question 21.
What are the guidelines for issue of summons?
Answer:
The Central Board of Indirect Taxes and Customs (CBIC) has issued guidelines from time to time to ensure that summons provisions are not misused in the field. Some of the important highlights of these guidelines are given below:
(i) summons is to be issued as a last resort where assessees are not co-operating and this section should not be used for the top management;
(ii) the language of the summons should not be harsh and legal which causes unnecessary mental stress and embarrassment to the receiver;
(iii) summons by Superintendents should be issued after obtaining prior written permission from an officer not below the rank of Assistant Commissioner with the reasons for issuance of summons to be recorded in writing;
(iv) where for operational reasons, it is not possible to obtain such prior written permission, oral/telephonic permission from such officer must be obtained and the same should be reduced to writing and intimated to the officer according such permission at the earliest opportunity;
(v) in all cases, where summons are issued, the officer issuing summons should submit a report or should record a brief of the proceedings in the case file and submit the same to the officer who had authorized the issuance of summons;
(vi) senior management officials such as CEO, CFO, General Managers of a large company or a Public Sector Undertaking should not generally be issued summons at the first instance. They should be summoned only when there are indications in the investigation of their involve¬ment in the decision-making process which led to loss of revenue.
Question 22.
What are the precautions to be observed while issuing summons?
Answer:
The following precautions should generally be observed when summoning a person:
(i) A summon should not be issued for appearance where it is not justified. The power to summon can be exercised only when there is an inquiry being undertaken and the attendance of the person is considered necessary.
(ii) Normally, summons should not be issued repeatedly. As far as practicable, the statement of the accused or witness should be recorded in minimum number of appearances.
(iii) Respect the time of appearance given in the summons. No person should be made to wait for long hours before his statement is recorded except when it has been decided very consciously as a matter of strategy.
(iv) Preferably, statements should be recorded during office hours; however, an exception could be made regarding time and place of recording statement having regard to the facts in the case.
Question 23.
What are the prescribed offences under CGST/SGST Act?
Answer:
The CGST/SGST Act codifies the offences and penalties in Chapter XVI. The Act lists 21 offences in section 122 of CGST Act, 2017, apart from the penalty prescribed under section 10 for availing compounding by a taxable person who is not eligible for it. The said offences are as follows:-
- Making a supply without invoice or with false/incorrect invoice;
- Issuing an invoice without making supply;
- Not paying tax collected for a period exceeding three months;
- Not paying tax collected in contravention of the CGST/SGST Act for a period exceeding 3 months;
- Non-deduction or lower deduction of tax deducted at source or not depositing tax deducted at source under section 51;
- Non-collection or lower collection of or non-payment of tax collectible at source under section 52;
- Availing/utilizing input tax credit without actual receipt of goods and/ or services;
- Fraudulently obtaining any refund;
- Availing/distributing input tax credit by an Input Service Distributor in violation of Section 20;
- Furnishing false information or falsification of financial records or furnishing of fake accounts/documents with intent to evade payment of tax;
- Failure to register despite being liable to pay tax;
- Furnishing false information regarding registration particulars either at the time of applying for registration or subsequently;
- Obstructing or preventing any official in discharge of his duty;
- Transporting goods without prescribed documents;
- Suppressing turnover leading to tax evasion;
- Failure to maintain accounts/documents in the manner specified in the Act or failure to retain accounts/documents for the period specified in the Act;
- Failure to furnish information/documents required by an officer in terms of the Act/Rules or furnishing false information/documents during the course of any proceeding;
- Supplying/transporting/storing any goods liable to confiscation;
- Issuing invoice or document using GSTIN of another person;
- Tampering/destroying any material evidence;
- Disposing of/tampering with goods detained/seized/attached under the Act.
Question 24.
What is meant by the term penalty?
Answer:
The word “penalty” has not been defined in the CGST/SGST Act but judicial pronouncements and principles of jurisprudence have laid down the nature of a penalty as: a temporary punishment or a sum of money imposed by statute, to be paid as punishment for the commission of a certain offence; a punishment imposed by law or contract for doing or failing to do something that was the duty of a party to do.
Question 25.
What is the quantum of penalty provided for in the CGST/SGST Act?
Answer:
Section 122(1) of CGST Act, 2017 provides that any taxable person who has committed any of the offences mentioned in section 122 shall be punished with a penalty that shall be higher of the following amounts: The amount of tax evaded, fraudulently obtained as refund, availed as credit, or not deducted or collected or short deducted or short collected; or; A sum of ₹10,000.
Further Section 122(2) of CGST Act, 2017 provides that any registered person who has not paid tax or makes a short payment of tax on supplies shall be a liable to penalty which will be the higher of: 10% of the tax not paid or short paid; or; ₹10,000.
Question 26.
Is any penalty prescribed for any person other than the taxable person?
Answer:
Yes. Section 122(3) of CGST Act, 2017 provides for levy of penalty extending to ₹25,000 for any person who aids or abets any of the 21 offences, deals in any way (whether receiving, supplying, storing or transporting) with goods that are liable to confiscation, receives or deals with supply of services in contravention of the Act, fails to appear before an authority who has issued a summon, fails to issue any invoice for a supply or account for any invoice in his books of account.
Question 27.
What action can be taken for transportation of goods without valid documents or attempted to be removed without proper record in books?
Answer:
If any person transports any goods or stores any such goods while in transit without the documents prescribed under the Act (i.e. invoice and a declaration) or supplies or stores any goods that have not been recorded in the books or accounts maintained by him, then such goods shall be liable for detention along with any vehicle on which they are being transported.
Where owner comes forward:
Such goods shall be released on payment of the applicable tax and penalty equal to 100% tax or upon furnishing of security equivalent to the said amount. In case of exempted goods, penalty is 2% of value of goods or ₹25,000 whichever is lesser.
Where owner does not come forward:
Such goods shall be released on payment of the applicable tax and penalty equal to 50% of value of goods or upon furnishing of security equivalent to the said amount. In case of exempted goods, penalty is 5% of value of goods or ₹25,000 whichever is lesser.
Question 28.
What is meant by confiscation?
Answer:
The word ‘confiscation’ has not been defined in the Act. The concept is derived from Roman law wherein it meant seizing or taking into the hands of emperor, and transferring to Imperial “fiscus” or Treasury. The word “confiscate” has been defined in Aiyar’s Law Lexicon as to “appropriate (private property) to the public treasury by way of penalty; to deprive of property as forfeited to the State.” In short in means transfer of the title to the goods to the Government.
Question 29.
When do goods become liable to confiscation under the provisions of CGST/SGST Act?
Answer:
As per section 130 of CGST/SGST Act, goods become liable to confiscation when any person does the following:
- supplies or receives any goods in contravention of any of the provisions of this Act or rules made thereunder leading to evasion of tax;
- does not account for any goods on which he is liable to pay tax under this Act;
- supplies any goods liable to tax under this Act without having applied for the registration;
- contravenes any of the provisions of the CGST/SGST Act or rules made thereunder with intent to evade payment of tax.
Question 30.
Can any conveyance carrying goods without cover of prescribed documents be subject to confiscation?
Answer:
Yes. Section 130 of CGST Act, 2017 provides that any conveyance carrying goods without the cover of any documents or declaration prescribed under the Act shall be liable to confiscation. However, if the owner of the conveyance proves that the goods were being transported without cover of the required documents/declarations without his knowledge or connivance or without the knowledge or connivance of his agent then the conveyance shall not be liable to confiscation as aforesaid.
Question 31.
What is Prosecution?
Answer:
Prosecution is the institution or commencement of legal proceeding; the process of exhibiting formal charges against the offender. Section 198 of the Criminal Procedure Code defines “prosecution” as the institution and carrying on of the legal proceedings against a person.
Question 32.
Which are the offences which warrant prosecution under the CGST/ SGST Act?
Answer:
Section 132 of the CGST/SGST Act codifies the major offences under the Act which warrant institution of criminal proceedings and prosecution. 12 such major offences have been listed as follows:
(a) Making a supply without issuing an invoice or upon issuance of a false/incorrect invoice;
(b) Issuing an invoice without making supply;
(c) Not paying any amount collected as tax for a period exceeding 3 months;
(d) Availing or utilizing credit of input tax without actual receipt of goods and/or services;
(e) Obtaining any fraudulent refund
(f) evades tax, fraudulently avails ITC or obtains refund by an offence not covered under clauses (a) to (e);
(g) Furnishing false information or falsification of financial records or furnishing of fake accounts/documents with intent to evade payment of tax;
(h) Obstructing or preventing any official in the discharge of his duty;
(i) Dealing with goods liable to confiscation i.e. receipt, supply, storage or transportation of goods liable to confiscation;
(j) Receiving/dealing with supply of services in contravention of the Act;
(k) tampers with or destroys any material evidence or documents;
(l) Failing to supply any information required of him under the Act/Rules or supplying false information;
(m) Attempting to commit or abetting the commission of any of the of¬fences at (a) to (t) above.
Question 33.
What is the punishment prescribed on conviction of any offence under the CGST/ SGST Act?
Answer:
The scheme of punishment provided in section 132(1) is as follows:
| Offence involving | Punishment (imprisonment extending to) |
| Tax evaded exceeding ₹5 crore or repeat offender for ₹250 lakh | 5 years and fine |
| Tax evaded between ₹2 crore and ₹5 crore | 3 years and fine |
| Tax evaded between ₹1 crore and ₹2 crore | 1 year and fine |
| False records/Obstructing officer/Tamper records | 6 months |
Question 34.
What is a culpable state of mind?
Answer:
While committing an act, a “culpable mental state” is a state of mind – wherein the act is intentional;
the act and its implications are understood and controllable;
the person committing the act was not coerced and even overcomes hurdles to the act committed;
the person believes or has reasons to believe that the act is contrary to law.
Section 135 of the CGST Act, 2017 provides that in any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution. The explanation to the said provision further provides that:-
(i) the expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact;
(ii) a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability
Question 35.
Can a company be proceeded against or prosecuted for any offence under the CGST/ SGST Act?
Answer:
Yes. Section 137 of the CGST/SGST Act provides that every person who was in-charge of or responsible to a company for the conduct of its business shall, along-with the company itself, be liable to be proceeded against and punished for an offence committed by the company while such person was in-charge of the affairs of the company. If any offence committed by the company
has been committed with the consent/connivance of, or
is attributable to negligence of any officer of the company then such officer shall be deemed to be guilty of the said offence and liable to be proceeded against and punished accordingly.
Question 36.
Are there any monetary limits prescribed for compounding of offence?
Answer:
Yes. The lower limit for compounding amount is to be the greater of the following amounts:
50% of tax involved; or;
₹10,000.
The upper limit for compounding amount is to be greater of the following amounts:
150% of tax involved; or;
₹30,000.
Question 37.
What is the procedure for compounding of offences?
Answer:
The applicant has to make an application in form GST CPD-01 to the Commissioner for compounding of an offence. The application is not allowed unless the tax, interest and penalty liable to be paid have been paid in the case for which the application has been made On receipt of the application, the Commissioner shall call for a report from the concerned officer with reference to the particulars furnished in the application, or any other information, which may be considered relevant for the examination of such application.
The Commissioner, after taking into account the contents of the said application, may, by order in FORM GST CPD-02, on being satisfied that the applicant has cooperated in the proceedings before him and has made full and true disclosure of facts relating to the case, allow the application indicating the compounding amount and grant him immunity from prosecution or reject such application within ninety days of the receipt of the application. The application shall not be decided without affording an opportunity of being heard to the applicant and recording the grounds of such rejection.
Inspection, Search, Seizure And; Arrest, Penalties, Demand And Recovery Under Gst Notes
Sections involved:
a. Inspection, Search, Seizure and Arrest: Sections 67 to 72 of CGST Act.
- Power of inspection, search, seizure and arrest.
- Inspection of goods in movement.
- Power to arrest.
- Power to summon persons to give evidence and produce documents.
- Access to business premises.
- Officers to assist proper officers.
b. Offences and penalties: Sections 122 to 138 of CGST Act:
- Penalty for certain offences (21 offences covered): X 10,000 or tax evaded/not deducted/not collected/Input Tax Credit availed of or passed on or distributed irregularly/claimed fraudulently, whichever is higher.
- Penalty for supplies on which tax has not been paid or short paid or erroneously refunded, or where ITC has been wrongly availed or utilised.
For any reason other than fraud: X 10,000 or 10% of the tax due from such person, whichever is higher.
For the reason of fraud: X 10,000 or 100% of the tax due from such person, whichever is higher.
- Penalty for any person other than the taxable person: (who aids or abets any of 21 offences): Penalty up to ₹ 25,000.
- Penalty for failure to furnish information return: ₹ 100 for
each day of the period during which failure to furnish such return continues or; ₹ 5,000, whichever is higher. 10.1
- Fine for failure to furnish statistics: ₹ 10,000 (maximum) + if continuing offence: ? 100 each day after the first day during which offence continues but a maximum ₹ 25,000.
- General Penalty: For person contravening any of provisions of this Act or any rules made thereunder for which no penalty is separately provided: maximum penalty – ₹ 25,000.
- No penalty to be imposed for minor breaches
- Power to waive penalty or fee or both in certain notified cases
- Power of detention or seizure of goods/conveyances
- Power of Confiscation of goods or conveyances and levy of penalty
- Cognizable and Non-cognizable offences.
- Provisions relating to the liability of officers and certain other persons
- Compounding of Offences
c. Demand and recovery: Sections 73 to 84 of CGST Act.
- Concept of Show Cause Notice (SCN)
- Time limit for issue of SCN:
a. Where fraud is not involved:
At least 3 months prior to the time limit specified for passing the order determining the amount of tax, interest and penalty payable by the defaulter. Further, the said order is to be passed within 3 years from the due date of furnishing the annual return for F.Y. to which tax not paid, etc. relates.
Thus, the time limit for issuance of SCN is 2 years and 9 months from the due date of filing the Annual Return for the financial year to which demand pertains or from the date of erroneous refund.
b. Where fraud is involved:
At least 6 months prior to the time limit specified for passing the order determining the amount of tax, interest and penalty payable by the defaulter. Further, the said order is to be passed within 5 years from the due date of furnishing the annual return for F.Y. to which tax not paid, etc. relates. Thus, the time limit for issuance of SCN is 4 years and 6 months from the due date of filing the Annual Return for the financial year to which demand pertains or from the date of erroneous refund.
- Quantum of Penalty:
a. Where fraud is not involved:
1096 of tax or ₹ 10,000, whichever is higher. However, NO PEN-ALTY if tax and interest are paid within 30 days of the issue of notice.
Note: Penalty continues to be payable if self-assessed tax is not paid within 30 days from the due date of payment of such tax (i.e. even if SCN is not issued, the penalty is payable if tax is paid beyond 30 days from the due date of payment of tax.)
b. Where fraud is involved:
The penalty is equivalent to tax i.e. 10096 of tax.
However, if voluntary payment of tax and interest, before SCN: 1596 of tax
If Tax, Interest paid within 30 days of issue of SCN: 2596 of tax. If Tax, Interest paid within 30 days of communication of adjudi¬cation order: 5096 of tax.
- General provisions relating to the determination of tax.
- Provisions relating to tax collected but not paid to Government.
- Provisions relating to initiation of recovery proceedings.
- Provisions dealing with the recovery of tax.
- Payment of Tax and other amounts in instalments.
- Transfer of property to be void in certain cases.
- Tax to be the first charge on property as per section 82 of CGST Act.
- Provisional attachment to protect revenue in certain cases.
- Provisions regarding continuation and validation of certain recovery proceedings.