Detailed analysis of Provisions of offences & Penalties under GST Law

‘A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.’

Every fiscal statute to exact taxes needs compliance of provisions and consequences of non-compliance or violation of provisions. The experience of law framers and executive enforcing such provisions have experienced the persons liable to comply with provisions more often than not do indulgence in conscious or out of ignorance or due to lack of diligence indulge in violation and non–compliance of mandatory provisions of provisions. Some of the non-compliance can defeat the consequent entitlements provided for benefit of persons liable to comply. Some violations attract penalties in terms of monetary fines, prosecution and punishment by imprisonments.

Experience shows that despite such bitter consequences, not infrequently, persons liable to comply do indulge in conscious, unconscious violations and attract bitter consequences.

The provisions are contained for penal consequences in Statute itself but if such act is also a violation of law under other Laws such as FEMA, Completion Law, MRTP Law, Direct Taxes Law, SEBI Law, Securities Contract Act, Indian Penal Code, Companies Law etc. The said provisions are independent of provisions of GST Law. The Scope of the present Article is not extended to such allied laws.

First provisions for non-compliance can be found in Section 47 regarding the levy of late fees. Second provisions are contained in Section 49 regarding the manner of payment of penalty.

Monetary Penalties:

Substantial provisions for liability of penalty for offences under the Act are contained in Chapter IX of the Act.

A

Sr No.	Offence
1	supplies any goods or services   without the issue of any invoice
	Issues an incorrect or false invoice  for the supply
2	issues any invoice or bill without supply of goods or services   violation Act or Rules
3	collects any amount as tax but fails to pay beyond three months of the due date. Note: Under Section 49(9) every person who has paid tax shall be deemed to have passed on the full incidence of such tax to the recipient. , unless the contrary is proved. Whether composition dealer selling on MRP is deemed to have a collection of tax in violation is a question to be decided.
4	fails to deduct the tax or collects  less than the amount required to be deducted where he fails to pay to the Government within ten days,
5	takes or utilizes ITC without actual receipt of goods or services   either fully or partially,
7	fraudulently obtains refund of tax under this Act;
8	takes or distributes input tax credit in contravention of section 20,
9	falsifies or substitutes financial records or produces fake accounts or documents
10	furnishes any false information or return with an intention to evade payment of tax due under this Act
11	is liable to be registered under this Act but fails to obtain registration
12	transports any taxable goods without the cover of documents as may be specified
13	suppresses his turnover leading to evasion
14	fails to keep, maintain or retain books of account and other documents
15	fails to furnish information or documents called for by an officer in accordance  or furnishes false information or documents during any proceedings under this Act;
16	supplies, transports or stores any goods which he has reason to believe are liable to confiscation under this Act;
17	issues any invoice or document by using the registration number of another registered person
18	tampers with, or destroys any material evidence or document;
19	disposes of or tampers with any goods that have been detained, seized, or attached under this Act

A common penalty for all such offences has been provided as minimum and maximum. In respect of any of the offences maximum penalty provided is the highest of the amount between Rs Ten Thousand and the amount of tax evaded. The word tax evaded is akin to conscious concealment of tax liability with an intention to comply. This means that without intention, the maximum liability cannot be fastened.  Whereas as avoidance of tax is in accordance with provisions of law, the evasion is akin to deliberate concealment of liability and due compliance. This element of consciousness will have to prove before levying the maximum penalty. In some offences, instead of the maximum penalty, the amount not or short collected or paid or short paid is provided as the maximum penalty. In those cases evasion element is missing or ITC availed in excess or refund erroneously refunded or excess ITC distributed, in those cases element of tax evasion thereby is not applicable and whatever excess is liable to be treated as the maximum penalty.

B.

Any person who retains the benefit of the following transaction and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed or passed on supplies any goods or services or both without issue of any invoice or issues:

1. an incorrect or false invoice with regard to any such supply;

2. issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

3. takes or utilizes input tax credit without actual receipt of goods or services or

4. both either fully or partially, in contravention of the provisions takes or distributes input tax credit in contravention.

This liability is also fastened on the person who abates and induced the fraudulent action by others though he, the record is not beneficiary. This is without prejudice to penalty leviable on the beneficiary.  This is draconian provision which makes supplier liable for mischief of the recipient.

C

Where a registered person who supplied goods or services, upon such transaction if tax has not been paid or short paid by him or he or if the third party gets a refund or claims ITC wrongly, liability is fastened irrespective of he being beneficiary of such wrongful refund or ITC claimed. This is draconian provision which makes supplier liable for mischief of the recipient.

This is divided into two parts:

In the first part, if there is no element of fraud or willful misstatement or suppression of facts to evade tax irrespective of which party penalty is restricted to Rs Ten Thousand or ten per cent of the tax due from SUCH person whichever is higher. If the resultant liability of either supplier or recipient occurs, then he is liable to penalty and not another person.

In the second part if there is an element of fraud or willful misstatement or suppression of facts to evade tax, irrespective of which party penalty is restricted to Rs Ten Thousand or of tax due from SUCH person whichever is higher. If the resultant liability of either supplier or recipient occurs, then he is liable to penalty and not another person.

D

Any person (may not be registered person) is liable to the penalty of Rs 25,000/- who:

Aids or abets any offences in the table above from Sr 1 to19 .This means who ever involved in any manner in committing offences come under this category irrespective of his position in respect of transaction. It can involve entire staff members who may not be aware of nature or legal aspect of the transaction ;

Acquires possession or Concerns himself in:

1. Transporting

2. Removing

3. Depositing

4. Keeping

5. Concealing

6. Supplying

7. Purchasing

8. Any manner deals

With goods, which he has reason to believe are liable to confiscation (Section 130 ). This also differentiates as to the role or position of a person involved. This is sweeping wide powers without restrictions or guidelines. The provisions are liable to be misused and misapplied.

1. Receives or concerns with supply or deals with supply in any manner, which he has reason to believe, are in contravention of provisions ;

2. Fails to appear on summons to produce evidence in any enquiry;

3. Fails to issue the invoice in accordance with the provisions or fails to account for an invoice in books;

E

Section 150 makes it obligatory for a taxable person, local authority or other public body or association or State Government Authority responsible for collecting value added tax  or sales tax or Central Government Authority responsible for collection of Central Excise or Custom Duty ,Income Tax Authorities and other several authorities to who are responsible for maintaining several records furnish information as may be prescribed in the prescribed manner. If the person or authority concerned fails to furnish information within the time specified in Notice, a penalty of Rs 100 per day subject to Rs 5,000/- is leviable.

F

Similarly, if statistics are not furnished as sought u/s 151, a penalty of Rs 10,000 and if continued offence Rs 100 per day of delay subject to Rs 25,000 is leviable.

Residual Power

S 127 If an offence is not covered by 62, 63,64,73,74 or 129 or 130, proper office may order for levying penalty after hearing the person. This provision is contrary to the jurisprudence principle that no penalty can be levied unless provided in law.

Waiver

Section 128:Upon recommendations of Central Council, the Government can waive penalty u/s 122 or 123 or 125 or late fees u/s 47 in part or in full as may be specified in notification for such class of taxpayers or in such mitigating circumstances.

General Discipline

For levying Penalty shall be observed by the officer.

• No penalty is leviable for minor breaches of tax regulations or procedural requirements and omission or mistake in documentation which can be easily rectifiable and made without fraudulent intent or gross negligence.
• Minor breaches are tax involved is less than Rs 5,000.
• Omission or mistake in documentation shall be considered easily rectifiable if the same is an error apparent on the record.
• The penalty imposed shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach and shall be after given the opportunity of being heard.
• Officer imposing penalty shall specify breach and applicable law.
• Self-disclosure of breach shall be a mitigating circumstance. Even provision of Sub Section (8) of Section 73 states that voluntary disclosure of liability of tax and interest and payment thereof within 30 days of issue of show cause notice, no penalty shall be payable.
• The above concessions cannot be applied where fixed penalty for offence has been prescribed.

Section 122 (1) penalty provides for a certain fixed amount as penalty and hence above concessions of mitigating circumstances would not apply.

Penalty u/s 129 for violation of a mandatory requirement of carrying documents while transporting goods.

Where a transporter does not carry documents required to accompany vehicle as required under provisions, his vehicle is liable to detention or seizure

Procedure for determination and levy of penalty:

A. Without reason of fraud or any willful misstatement or suppression of facts.

Sections 73,   for determination of basis for levying penalties, without reason of fraud or any willful misstatement or suppression of facts.

Section 74 provides for determination of penalties where there is the reason of fraud or any willful misstatement or suppression of facts.

Determination grounds of the basis of penalty are common as follows:

1. Tax not paid;

2. Tax short paid;

3. Tax erroneously refunded;

4. ITC wrongly availed or utilised;

Both sections begin with “if it appears to the proper officer”. This is a is giving wide discretion for the officer to form an opinion but as per judicial precedents the opinion is to be based on reasons to believe on the basis of records available with him and is required to be in writing objectively and not on mere suspicion , surmises or conjectures.

In short, a proper officer is required, in case the lapse is without reason of fraud or an willful misstatement or suppression of facts. The meaning of “suppression” is given in Explanation I of Section 74 to mean non-declaration of facts or information which the person is required to declare in the return, statement, report or any other document to be furnished or failure file information on being asked. The proper officer is required to  follow the procedure as under:

1. Frame an opinion on records available on record that above lapses have occurred;

2. Frame an opinion that such lapses have been without reason of fraud or an willful misstatement or suppression of facts;

3. Serve a Notice to show cause why he should not pay amount of tax, interest and penalty leviable under the Act . Notice is required to be issued before the expiry of three months before the date of filing the annual return for the financial year in respect of which lapse related along with the statement containing details of lapses.

4. In case if the person liable voluntarily pays the amount of tax and interest  before service of notice and intimates accordingly to the proper officer, no notice or statement is required to be issued and thus no penalty will be attracted.

5. If the person liable pays the tax and interest within 30 days of the date of the notice, no penalty is payable. But if amount falling short of actual payment determined, shall only be considered for levy of penalty and whatever is paid within thirty days shall not be considered for penalty;

6. If the person does not pay the amount of tax and interest, within thirty days of date of notice, after considering any representation, if any, the proper officer will determine the tax amount related to lapse and interest there on and levy a penalty of minimum of Rs 10,000 or 10 % of quantum tax involved whichever is higher and shall issue an order within three years of the last date of filing annual return in respect of the relevant financial year in respect of which lapse has occurred.

B. With reason of fraud or a willful misstatement or suppression of facts:

1. Frame an opinion on records available on record that above lapses have occurred;

2. Frame an opinion that such lapses have been by reason of fraud or any willful misstatement or suppression of facts. There has to be prima facie material to suggest that there is an intention and active action to evade tax payment.

3. Serve a Notice, within six months prior to the last date of passing final order which is within five years of the last date of filing annual return in respect of the financial year to which lapse relates, to show cause why he should not pay amount of tax, interest and penalty leviable under the Act equivalent to amount of tax mentioned in the Notice. The amount obviously will be aggregate of : -Tax not paid; Tax short paid; Tax erroneously refunded; ITC wrongly availed or utilised the Notice is required to be issued before expiry of three months before the date of filing annual return for the financial year in respect of which lapse related along with the statement containing details of lapses. In case of fraud etc. the word used is penalty equal to the amount of tax and in contrast to where there is the absence of fraud etc. word used is a penalty payable under the Act. The penalty is restricted to 10% of the amount tax short paid etc in case of absence of fraud etc. whereas in case of presence of fraud the penalty provided is equal to the amount of tax involved.

4. In case if the person liable voluntarily pays the amount tax and interest and 15% of the amount of tax lapse as and by way of penalty,  before service of notice and intimates accordingly to the proper officer, no notice or statement is required to be issued and thus no penalty will be accepted and the issue gets closed.

5. If the person liable pays the tax and interest and penalty equal to 25 % of the tax involved as a penalty, within 30 days of the date of the notice, no penalty is payable and proceedings get concluded. But if amount falling short of actual payment determined, shall only be considered for levy of penalty and whatever is paid within thirty days  shall not be considered for penalty;

6. If the person does not pay the amount of tax and interest, or required penalty within thirty days of date of notice, after considering any representation, if any, the proper officer will determine tax amount related to lapse and interest thereon and levy penalty and shall issue an order within five years of last date of filing annual return in respect of the relevant financial year in respect of which lapse has occurred.

7. If the person liable pays the tax and interest and penalty equal to 50 % of the tax involved as a penalty, within 30 days of the date of order,   and proceedings get concluded. No further penalty is payable But if the amount falling short of the actual payment determined, shall only be considered for levy of penalty and whatever is paid within thirty days  shall not be considered for a penalty.

8. With effect from 1.1.2022 the proceedings initiated u/s 129 & 130 for E-way bill violations, i.e. detention, seizure and confiscation of goods or conveyances shall be independent proceedings and closure of parallel proceedings u/s 73 or 74 (in respect of any person including the subject person) shall not result in the deemed closure of the proceedings initiated u/s 129 & 130.

Judicial Precedents.

The penalty will not also be imposed merely because it is lawful to do so.

The Supreme Court held in its decision in Hindustan Steel Ltd. V. The State of Orissa1969 SCC  (2) 627 as follows :

• An order imposing a penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or guilty of conduct, contumacious or dishonest, or acted in conscious disregard to its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be https://taxinformation.cbic.gov.in/content-page/explore-act justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.

Mandatory vs Discretionary Penalty:

Mandatory:

• It may be true that the use of the expression “shall or may” is not decisive for arriving at a finding as to whether a statute is a directory or mandatory. But the intention of the Legislature must be found out from the scheme of the Act. It is also equally well settled that when negative words are used the Courts will presume that the intention of the Legislature was that the provisions are mandatory in character – Nasiruddin v. Sita Ram Agarwal [AIR 2003 SC 1543 (1552)]
• The Supreme Court has held that where the legislature makes its intention clear through the use of the word “shall”, the provision would be mandatory with regard to the quantum of penalty imposable. . In GST , Section 122(2) provides for the word “shall” and hence penalty is mandatory to the extent of the amount provided. Union of India V Dharmendra Textile Processors[(2008) 306 Taxman 277 (SC)]

Discretionary: Ø  In the Addl. Commissioner Of Sales vs M/S Ankit International  SALES TAX APPEAL NO. 9 OF 2011 by judgment dt 15.09.2011 Bombay High Court has held that word “may “ used in section 61(2) has provided to CST, a discretion about levy and quantum of penalty.

Mens Rea:

• In Gujarat Travancore Agency v. CIT [(1989) 177 ITR 455 (SC)] Supreme Court has held that mens rea is not required to be proved in proceedings under s. 271(1)(a) of the Income Tax Act. Non compliance of mandatory provisions, attracts penalty , irrespective of the presence of men rea. A penalty provision in a taxing statute is distinguished from a provision creating an offence and the former does not involve the concept of mens rea.
• Chairman, SEBI v. Shriram Mutual Fund & Other [(2006) 68 SCL 216 (SC)] The legislature in its wisdom had not included mens rea or deliberate or willful nature of default as a factor to be considered by the Adjudicating Officer in determining the quantum of liability (sic penalty) to be imposed on the defaulter. Sections 15A to 15H and 15HA employ the words “shall be liable” and, therefore, mandatorily provide for the imposition of monetary penalties for respective breaches or non-compliance of provisions of the SEBI Act and the Regulations. The Scheme of the SEBI Act of imposing penalty is very clear. Chapter VI nowhere deals with criminal offences. These defaults for failures are nothing, but failure or default of statutory civil obligations provided under the Act and the Regulations made thereunder. It is pertinent to note that Section 24 of the SEBI Act deals with the criminal offences under the Act and its punishment. Therefore, the proceedings under Chapter VI A are neither criminal nor quasi-criminal. The penalty leviable under this Chapter or under these Sections is a penalty in cases of default or failure of statutory obligation or in other words breach of civil obligation. In other words, the breach of a civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not.

Provision of the penalty must be at the time committing offence.

• No person shall be convicted of any offence except for violation of a law in force at the time of the commission of that act charged as an offence, nor be subjected to a penalty greater than with which he might have been inflicted under the law in force at the time of the commission of the offence – Dayal Singh v. State of Rajasthan [(2004) 5 SCC 721]

Ambiguous provisions:

• In view of the nature and character of a penal provision, it must be construed strictly regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer. If a subject falls squarely within the letter of the law he must be no matter that such a construction may cause grave prejudice to the revenue. Equitable construction is out of place in respect of a penal provision and such a construction is not permissible in interpreting a charging provision of a taxing statute. The golden rule is that if the provision is capable of two alternative meanings, the court should lean in favour of the subject; if the provision lacks in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect, and, naturally, the subject cannot be penalised.  Penalty provision should be interpreted as it stands and in case of doubt in a manner favourable to the taxpayer. If the Court finds that the language of a taxing provision is ambiguous or capable of more meaning than the one, then the Court has to adopt the interpretation which favours the assessee, more particularly so, where the provision relates to the imposition of penalty – CIT v. Vegetable Products [(1973) 88 ITR 192 (SC); CIT v. Maskara Tea Estate [(1981) 130 ITR 955 (Gauh.) and C.A. Abraham v. ITO [(1961) 41 ITR 425 (SC)]

Other Principles discernable on penalties:

• “In Dilip N. Shroff v. Jt. CIT[2007] 6 SCC 329, this Court explained the terms “concealment of income” and “furnishing inaccurate particulars”. The Court went on to hold therein that in order to attract the penalty under section 271(1)( c), mens rea was necessary, as according to the Court, the word “inaccurate” signified a deliberate act or omission on behalf of the assessee. But this ratio was upset by Apex Court in Dharmendra Textiles Processors and after quoting from section 271 extensively and also considering section 271(1)( c), the Court came to the conclusion that since section 271(1)( c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of section 271(1)( c) read with Explanations indicated with the said section was for providing a remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act – Union of India v. Dharmendra Textile Processors [(2008) 306 Taxman 277 (SC)]
• The duty of the Assessing Officer is to assess real and correct income in accordance with the law. The CBDT in its Circular No. 14(XL35) of 1955 dated 11.04.1955 ‘regarding departmental attitude towards’ – stated that The CBDT in its Circular No. 14(XL35) of 1955 dated 11.04.1955 ‘regarding departmental attitude towards’ – stated that Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him.
• `Concealment’ refers to a deliberate act on part of the assessee; if the explanation given by the assessee with regard to the mistake committed by him has been treated to be bonafide and it has been found as a fact that he has acted on basis of wrong legal advice, the question of his failure to discharge his burden in terms of Explanation appended to section 271(1)(c) would not arise – Ashok Pai v. CIT [(2007) 292 ITR 11 (SC)]
• Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment, and therefore, in such a case no such penalty can survive and the same is liable to be cancelled. Ordinarily, a penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and is liable to be cancelled – C. Builders v. ACIT [(2004) 265 Taxman 562 (SC)]    
• Propositions from the decisions of SC in CIT v. Reliance Petroproducts (P.) Ltd. [(2010) 322 ITR 158 (SC)] held – a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding income of assessee; merely because the assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty under section 271 (1)(c).
• Where tax audit report filed along with return unequivocally stated that provision for payment of gratuity was not allowable under section 40A(7) but due to a bona fide and inadvertent error, the assessee failed to add a provision for gratuity to its total income, the assessee could not be held to be guilty of furnishing inaccurate particulars of income for levying penalty under section 271(1)(c) .Price Waterhouse Coopers (P.) Ltd. v. CIT [(2012) 348 ITR 306 (SC)]
• When the tax was calculated under section 115JB, penalty under section 271(1)(c) could not be imposed in respect of addition / disallowance made in assessment under normal procedure – CIT v. Nalwa Sons Investment Ltd. ITA No. 1420/2009 Delhi High Court Judgment delivered on: August 26, 2010
• Interpretation of penal provisions should follow the rules of interpretation of penal laws – Jain (NK) v. Shah (CK) [AIR 1991 SC 1289] and Antulay (AR) v. Ramdas Srinivas Nayak [AIR 1984 SC 718].
• In construing a penal statue, the object of the law must be clearly borne in mind – Pratap Singh v. State of Jharkhand [(2005) 3 SCC 551]:

Natural justice

Natural justice should not be treated in the abstract. It should be treated in the practical context of the administration of justice and what is natural or not, depends a good deal on the particular facts and circumstances of each case.  Supreme Court in Rampyari Devi Saraogi v. Commissioner of Income-tax [(1968) 67 ITR 84, 89 (SC)], where the following observations occur: “The assessee, in our view, has not in any way suffered from the failure of the Commissioner to indicate the results of the enquiries, mentioned above. Moreover, the assessee will have full opportunity of showing to the Income tax Officer whether he had jurisdiction or not and whether the income assessed in the assessment orders which were originally passed was correct or not”

Punishments:

All fiscal statute provide for punishment by way of imprisonment and fines for violation of provisions of the law, apart from providing for penalties. Punishment is the infliction of some kind of pain or loss upon a person for a misdeed (i.e., the transgression of a law or command).  The punishment has a component of infliction on body of an offender, and the fine has no co-relation  to the loss suffered by the State but depends on the gravity of the act.

The section 132 provide for various offences. The offences overlap with offences with the offences enumerated in section 122. As per section 131, the penalty or confiscation under any other provisions does not prejudice the levy of punishment under any other provisions. This means penalty can be levied and prosecution can be initiatied for violation of any provisions simultaneously. The process of prosecution is to be followed under the provisions of the Criminal Procedure Code 1973 by filing a complaint to a police station by lodging an FIR or by making direct complaint to the First Class Magistrate (Section 134) of the area in which offence is alleged to have been committed. The pre-condition of launching prosecution is that the prosecution must have the sanction of the Commissioner.

The following offences are cognizable and non-bailable:

[Note: In case of cognizable offence, the police can arrest the accused without a warrant as well as can start an investigation without the permission of the court.   .

(a) Supply of goods or services or both without the cover of invoice with an intent to evade tax;

(b) If any person issues any invoice or bill without actual supply of goods or services or both leading to wrongful input tax credit or refund of tax;

(c) Any person who avails input tax credit using invoice referred in point (b) above or fraudulently avails input tax credit without any invoice or bill ;

(d) Collection of taxes without payment to the Government for a period beyond 3 months of due date;]

All other offences are non-cognizable and bailable.

Note: In case of a non-cognizable offence, the police cannot arrest the accused without a warrant as well as cannot start an investigation without the permission of the court.  Non-cognizable offence in which Police can neither register the FIR nor can investigate or effect arrest without the express permission or directions from the court. Section 436 of the Code of Criminal Procedure deals with provisions of bail in bailable offences. This provision casts a mandatory duty on police officials as well as on the Court to release the accused on bail if the offence alleged against such person is bailable in nature.

Some examples of offences u/s 122 which do not attract prosecution u/s 132 are as follows:

1. fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax.

2. is liable to be registered under this Act but fails to obtain registration;

3. furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently;

4. transports any taxable goods without the cover of documents as may be specified on this behalf;

5. suppresses his turnover leading to evasion of tax under this Act.

Some examples of offences u/s 132 which do not attract penalty u/s 122 are as follows:

1. 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 law;

2. tampers with or destroys any material evidence or documents;

3. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section 132.

Quantum of imprisonment:

Amount of Tax Evaded	Period of Imprisonment
More than 5 Crores	Upto 5 Years
Rs.2 to Rs.5 Crores	Upto 3 Years
Rs. 1 to Rs.2 Crores	Upto 1 Year
Less than 1 Crore	No Imprisonment

If Any person convicted of an offence under section 132  is again convicted of an offence under this section, may be any other offence, 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.

The imprisonment for offences from 1 crore and above and in case of second offences  shall, in the absence of special and adequate reasons, be for a term not less than six months.

As per section 135, If any prosecution for an offence   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 expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact with strict proof thereof required and not on the preponderance of probabilities.

Offences by Companies and other entities.

Companies

When an offence committed 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 the 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. Not all persons who are employed    in any manner or involved in activities leading to committing an offence is covered but it has to be established that that person was responsible for the conduct of business of the company. Members of the board are ordinarily responsible for conducting of business of a company. However, nominal directors or bank directors or legal directors are not conducting business though they attend BOD meetings and work in advisory capacities or watchdog for their principals. These directors may be excluded from being penalised.

Even then where an 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 another 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. This aspect deals with the officers who are responsible for compliance and neglect to comply or consciously consent or connive, they can be roped up.

Partnership firm or a Limited Liability Partnership or a Hindu undivided family or a trust

In these entities, the partner or Karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions for companies shall equally apply to such persons.

Immunity

If a person can prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence, he gets immunity from being penalised.

Compounding of offences.

The offence need not have culminated in penalties and punishments.

Any offence under this Act may   be compounded by the Commissioner on payment  of such compounding amount

Compounding is not permissible in case of offences as follows:

(a) a person who has been allowed to compound once in respect of any of the following offences:

(a) Supplies any goods or services   without issue of any invoice,  with the intention to evade tax;

(b) Issues any invoice or bill without supply of goods or   leading to wrongful availment or utilisation of input tax credit or refund of tax;

(c)  Avails input tax credit using such invoice or bill referred to in above or fraudulently avails input tax credit without any invoice or bill

(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the due date;

(e) Evades tax, fraudulently avails input tax credit  or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d) above;

(f) Falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;

g) a person who has been allowed to compound once in respect of any offence,

h) Committing an offence under this Act which is also an offence under any other law for the time being in force;

i) After the conviction of any offence under this Act by a court;

j) a person who has been accused of committing an offence specified in the clause :

a) obstructs or prevents any officer in the discharge of his duties under this Act;

b) tampers with or destroys any material evidence or documents;

c) fails to supply any information or supplies false information.

The minimum and maximum amount for compounding shall not be less:

1. ten thousand rupees or

2. fifty per cent of the tax involved, whichever is higher,

3. the maximum amount not being less than thirty thousand rupees or one hundred and fifty per cent. of the tax, whichever is higher.

On payment of compounding amount no further proceedings shall be initiated in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.

An opportunity of being heard is necessary before the application for compounding is decided.

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Author: Vinay Sonpal LL.M.  | Advocate, High Court,Bombay