Prosecution and Compounding under GST

By | September 6, 2016
(Last Updated On: September 6, 2016)

PROSECUTION AND COMPOUNDING UNDER GST

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Prosecution for Offences under GST Law

As per clause 73(1) of GST Model Law, 2016, whoever commits any of the following offences, namely—

(a) supplies any goods and/or services without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
(b) issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made thereunder;
(c) collects any amount as tax but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due;
(d) collects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due;
(e) takes and/or utilizes input tax credit without actual receipt of goods and/or services either fully or partially, in violation of the provisions of this Act, or the rules made thereunder;
(f) fraudulently obtains refund of any CGST/SGST;
(g) falsifies or substitutes financial records or produces fake accounts and/or documents or furnishes any false information with an intention to evade payment of tax due under this Act;
(h) obstructs or prevents any officer in the discharge of his duties under this Act;
(i) 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 reason to believe are liable to confiscation under this Act or the rules made thereunder;
(j) 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 reason to believe are in contravention of any provisions of this Act or the rules made thereunder;
(k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
(l) attempts to commit, or abets the commission of, any of the offences mentioned in clauses (a) to (k) of this section;

shall be punishable —

(i) in cases where the amount of tax evaded exceeds two hundred and fifty lakh rupees, with imprisonment for a term which may extend to five years and with fine;
(ii) in cases where the amount of tax evaded exceeds fifty lakh rupees but does not exceed two hundred and fifty lakh rupees, with imprisonment for a term which may extend to three years and with fine;
(iii) in the case of any other offence where the amount of tax evaded exceeds twenty five lakh rupees but does not exceed fifty lakh rupees, with imprisonment for a term which may extend to one year and with fine.

Repeat conviction

If any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine – clause 73(2) of GST Model Law, 2016.

Minimum punishment

In the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, the imprisonment referred to in sub-sections (1) and (2) shall not be for a term of less than six months.

 Offence cognizable and non-bailable only in specified cases

The offences relating to taxable goods and/or services where the amount of tax evaded exceeds two hundred and fifty lakh rupees shall be cognizable and non-bailable – clause 73(4) of GST Model Law, 2016.

Other offences (i.e. below 250 lakhs) shall be non-cognizable and bailable – clause 73(3) of GST Model Law, 2016.

Prosecution only with sanction of designated authority – A person shall not be prosecuted for any offence under this section except with the previous sanction of the designated authority.

Cognizance of offences

No Court shall take cognizance of any offence punishable except with the previous sanction of the designated authority, and no Court inferior to that of a Magistrate of the First Class, shall try any such offence – clause 74 of GST Model Law, 2016.

Presumption of culpable mental state

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 – clause 75 of GST Model Law, 2016.

“Culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact.

For the purposes of this section, 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.

Relevancy of statements under certain circumstances

(1) A statement made and signed by a person before any gazetted officer of CGST/IGST/SGST during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,—

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice – clause 76(1) of GST Model Law, 2016.

The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court – clause 76(2) of GST Model Law, 2016.

Thus, the statement is relevant evidence before First Appellate Authority and Appellate Tribunal also.

Presumption as to documents in certain cases

This is rule of evidence.

Where any document-

(i) is produced by any person under the Act or any other law, or

(ii) has been seized from the custody or control of any person under the Act or any other law, or

(iii) has been received from any place within or outside India in the course of any proceedings under the Act or any other law, and such document is tendered by the prosecution in evidence against him or any other person who is tried jointly with him, the court shall presume that document as valid and genuine – clause 106 of GST Model Law, 2016.

This is rebuttable presumption. The accursed can produce evidence to establish that the document is not genuine and cannot be accepted as evidence.

Document” includes written or printed record of any sort and electronic record as defined in the Information Technology Act, 2000 – clause 2(38) of GST Model Law, 2016.

 Admissibility of micro films, facsimile copies of documents and computer printouts as documents and as evidence

(a) micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or

(b) a facsimile copy of a document; or

(c) a statement contained in a document and included in a printed material produced by a computer shall be accepted as evidence if conditions specified are fulfilled – clause 107(1) of GST Model Law, 2016.

The conditions are not easy.

Offences by Companies and certain other persons

Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly – – clause 77(1) of GST Model Law, 2016.

Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly – clause 77(2) of GST Model Law, 2016.

Company includes firm and director includes partner – (a) “company” means a body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.

Liability of partner, karta or managing trustee – Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee, as the case may be, shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall apply mutatis mutandis to such persons.

No punishment if offence without knowledge or when due diligence exercised – Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence – clause 77(4) of GST Model Law, 2016.

Compounding of offences

Any offence under the Act may, either before or after the institution of prosecution, be compounded by the Competent Authority on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed – clause 78(1) of GST Model Law, 2016.

Compounding does not affect proceedings under other law – Any compounding allowed under the provision of this section shall not affect the proceedings if any, instituted under any other law:

Compounding only after tax, interest and penalty paid – Compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences.

 Following offences cannot be compounded.

Following offences cannot be compounded.

(a) a person who has been allowed to compound once in respect of any of the offences described under clauses (a) to (g) of sub-section (1) of section 73 and the offences described under clause (l) which are relatable to offences described under clauses (a) to (g) of the said sub-section;
(b) a person who has been allowed to compound once in respect of any offence (other than those in clause (a)) under the Act or under the provisions of any other SGST Act or IGST Act in relation to supplies of value exceeding rupees one crore;
(c) a person who has been accused of committing an offence under the Act which is also an offence under the Narcotic Drugs and Psychotropic Substance Act, 1985 (61 of 1985), the Foreign Exchange Management Act, 1999 (42 of 1999) or any other Act other than the CGST/SGST Act;
(d) any other class of persons or offences as may be prescribed.

Compounding fees payable

The amount for compounding of offences under this section shall be as may be prescribed under the rules to be made under sub-section (1), subject to the minimum amount not being less than rupees ten thousand or fifty per cent of the tax involved, whichever is greater, and the maximum amount not being more than rupees thirty thousand or one hundred and fifty per cent of the tax, whichever is greater – clause 78(2) of GST Model Law, 2016.

 Discharge after paying compounding fees

On payment of such compounding amount as may be determined by the competent authority, no further proceedings shall be initiated under the Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated- clause 78(3) of GST Model Law, 2016.

Thus, compounding can be after initiation of criminal proceedings also.

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