Inspection, Search, Seizure and Arrest and Other Stringent Provisions– Under GST Regime – Post Updated Budget 2025
Summary: The Goods and Services Tax (GST) Act, 2017, nearing its eighth anniversary, is being evaluated for its effectiveness, challenges, and alignment with its original objectives. The updated provisions under the Budget 2025 refine procedures for inspection, search, seizure, arrest, demand, recovery, and penalties. Key enforcement tools under Sections 67 to 72 empower Joint Commissioners to authorize inspections if there is “reason to believe” tax evasion is occurring. The term involves factual assessment rather than opinion. Judicial clarity from the Supreme Court in Radhika Agarwal v. Union of India emphasized that arrests under GST should comply with statutory safeguards and be backed by material evidence, not be routine. Rights of suppliers include requesting copies of seized documents, provisional release of goods, and mandatory return of irrelevant items within 30 days. Sections 122–138 elaborate penalties for offenses such as wrongful ITC claims, failure to pay tax, and transporting goods without valid documents. Detained goods incur penalties that vary depending on whether the owner acknowledges the violation. Offenses may lead to imprisonment of up to five years, particularly if tax evasion exceeds ₹5 crores. For companies, responsible officials are held liable unless they prove lack of knowledge or due diligence. Offenses can be compounded by paying a fee between 25% to 100% of the tax involved, ceasing further legal action. The analysis encourages cautious application of these stringent powers and compliance with due process to avoid legal risks.
The Goods and Services Tax (GST) Act, 2017, will reach its eighth anniversary within three months. Following eight years of implementation, the Act’s effectiveness should be evaluated based on the following factors:
Impact Assessment
1. Effectiveness: Evaluate the act’s success in achieving its intended goals and objectives.
2. Outcomes: Assess the positive and negative outcomes, including any unintended consequences.
Comparison with Objectives
1. Original intent: Compare the act’s actual impact with its original objectives and goals.
2. Evolution: Assess how the act has evolved over time, including any amendments or revisions.
Challenges and Opportunities
1. Challenges: Identify challenges, obstacles, or limitations that have arisen during implementation.
2. Opportunities: Explore opportunities for improvement, expansion, or modification.
The initial implementation of India’s GST Act, spanning from July 1, 2017, to March 31, 2025 (with post-implementation adjustments and claim processing extending to September 30, 2025), involved the filing of annual returns, reconciliation statements, and GST audits by December 31, 2025.
Authorities concurrently enforced provisions related to inspections, searches, seizures, arrests, demand and recovery procedures, and offenses and penalties. Numerous judicial decisions, both favorable and unfavorable to taxpayers, have been rendered in appeals, appellate revision requests, writ petitions, and special leave petitions.
Related sections of GST Act, 2017 covered in this Article–
1. Chapter XIV Section 67 to 72 – Inspection, Search, Seizure & Arrest (r/w Rule -139 to 141 Chapter XXVII)
2. Chapter XV – Section 73 to 84 – Demand & Recovery (r/w Rule – 142 to 161 Chapter XVIII)
3. Chapter XVI – Section 85 to 94 – Liability to pay in certain cases
4. Chapter XIX Section 122A to 138 – Offences & Penalties (r/w Rule 162 Chapter XIX)
While the relevant provisions are extensive, this article offers a concise overview designed to provide clarity. Instead of a sequential explanation, related provisions will be grouped for improved comprehension.
This document analyzes key aspects of the landmark “Radhika Agarwal v. Union of India Supreme Court judgment (February 27, 2025)”, a three-judge bench decision led by Chief Justice of India Shri Sanjeev Khanna. A thorough review of this ruling is crucial for a comprehensive understanding of the GST Act’s arrest provisions and the powers of Indian GST authorities.
What is Inspection, Search, Seizure & Arrest:
Section 67(1) Starts with the sentence – Where “Proper Officer” has “reasons to believe” that:
Who is Proper Officer u/s 2(91) “proper officer” in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board;
Here u/s 67(1) – Proper Officer means – not below the rank of Joint Commissioner who Authorizes in Form No. GST INS-01 {CGST Rule 139(1)} 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. Issued forms GST INS-02, 03 – order of seizure and order of prohibition for not removing of goods etc. respectively.
Meaning of “reasons to believe”:
‘Reason to believe’ means having knowledge of facts (although does not mean having direct knowledge), that would make any reasonable person, knowing the same facts, to reasonably conclude the same thing.
As per the Indian Penal Code, 1860, “A person is said to have ‘reason to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.”
Reason to believe is a determination based on intelligent examination and evaluation. It is different from a purely subjective consideration, i.e., an opinion. It is based on facts rather than an interpretation of facts.
Now what is “reason to believe” for as per the Section 67 that Joint Commissioner is form the opinion that authorized officers should Inspect or conduct a Search at the premises of any taxable person, those are enumerated below:
I. If he has suppressed any transaction of supply of goods or services
II. If he has suppressed any information of goods in hand
III. Claimed excess ITC of his entitlement under this Act
IV. Evading Tax by indulging in contravention of any provisions of the Act/Rule etc.
V. If any Transporter, Owner of warehouse/godown or any other place of keeping goods for escaping payment of tax or keeping accounts with wrong entries or presentation to evade tax.
Section 67(1) – Authorizes to JC to authorize any other officer to inspect business premises or Godown or warehouse if a person is in Transport or Storing of Goods business.
Section 67(2) – Authorizes to JC himself or any authorised officer by him in pursuance of inspection under section 67(1) or otherwise if he has reason to believe that goods or books are liable to confiscate/Seize useful for determination of correct tax liability then he can. [Proper officer shall issue an order u/r 139(2) in Form GST INS -02]
Further same section is also authorizes if it is not possible to confiscate the goods then in the premises of supplier goods can be demarked and instructed for not removal of goods till it is approved by seizing authorities. [Order of Prohibition in Form GST INS-03] Books/goods so seized will be released after completion of checking so long as it goes.
** Irrelevant documents will be returned within 30 days from the date of issue of notice, it means the authorities have to decide what is required and what is not required within 30 days.
Section 67(4) gave all rights to the officers to conduct search & seizure by any means including 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.
In light of Judgement as referred initially in this article “Radhika Agarwal vs Union Of India” the “Reason to believe is concluded as under:
The said judgment referred F.No. GST/INV/Instructions/2021-22 GST-Investigation Unit 17th August 2022 of Subject: Guidelines for arrest and bail in relation to offence punishable under the CGST Act, 2017 “the evidence available and that he has reason to believe that the person has committed an offence as mentioned in Section 132 of the GST Act”. Further, also taken view and provisions of other Law by the court – Such power of arrest can be exercised only in those cases where the Customs officer has a reason to believe that the person is guilty of an offence punishable under the said Act.
However, when the legality of such an arrest made under the Special Acts like PMLA, UAPA, Foreign Exchange, Customs Act, GST Acts, etc. is challenged, the Court should be extremely loath in exercising its power of judicial review. In such cases, the exercise of the power should be confined only to see whether the statutory and constitutional safeguards are properly complied with or not, namely to ascertain whether the officer was an authorized officer under the Act, 2022 SCC, whether the reason to believe that the person was guilty of the offence under the Act, was based on the “material” in possession of the authorized officer or not, and whether the arrestee was informed about the grounds of arrest as soon as may be after the arrest was made. Sufficiency or adequacy of material on the basis of which the belief is formed by the officer, or the correctness of the facts on the basis of which such belief is formed to arrest the person, could not be a matter of judicial review.
Rights of Supplier During Search:
## As a right of supplier – you can take copy of extract of documents/goods seized by officers except those which think by Officer is not allowable to give because it can affect the investigation – say any diary or rough record which was created on sight actual record that is kept secret by officer for comparing with books of account i.e. on a piece of paper list of Invoices issued with value in hand written format seized by Officers and that is different than actual that may be refused by officers to give you details. [Section 67(5)]
## Seized goods may be provisionally released by giving bond and security of the value equal to quantum as may be decided or by making payment of tax, interest and penalty, as the case may be. [Rule 140 Form GST INS-04]
## If within 6 months of goods seized no notice is issued to supplier then goods have to be returned by the Officers. Further, these 6 months may be extended max to further 6 months in special circumstances by the proper officer. [u/s 67(7) with proviso]
## In case of perishable goods or special type of goods which cannot by carried for long time then proper officer, if supplier fails to pay amount as referred above {r/w Rule 140(2)} may sale/disposed off at it’s best judgment and proceedings will be kept under protest against the recovery from supplier. [Rule 141(1) – Form GST INS-05]
## Supplier has right u/s 67(9) to take proper inventory of goods seized.
** Few Precautions at the time of inspection/ search/seizure:
1. Do not try to be smart over the officers who have come to your premises.
2. They have certain information – which may correct or wrong but your dubious behavior or wrong statement may prove you wrong.
3. Come before authorities clean handed do not hide anything, their intention of inspection/search is to make you law abiding not to harm you.
4. As per the Registration Certificate there is “Authorised Person” so statements would be given by that person only. But proper officer has full right to summon any person to whom they may feel deem fit for statement.
5. U/s 71(1) officers have full power to access any place of business, records, property, computer etc so do not try to avoid or stop them to access anything or any place.
6. If at any point knowledge is not complete of any person from whom officers are taking statement then do not give any statement by guess work, give straight forward answer “that I am not aware” and give name of person who is aware with whole transactions and it is better to give correct answer rather guess work.
7. Authorities have full power and technical background so give password of protected files.
8. Disclose in registration your all place of business as additional place of business otherwise at the time of search these places/warehouse/godown will be treated as “Un-Authorised Business Premises”.
DEMANDS & RECOVERY
[Chapter XV – u/s 73 to 84 & Rules Chapter XVIII Rules 142 to161]
The demand raised by department has two major criterions and remember all provisions provided in Act has these two bases only:
i. Demand arises due to Natural/Genuine or due to innocence of supplier
ii. Demand raised by reason of fraud or any wilful-misstatement or suppression of facts to evade tax,
Factors responsible for Demand raised by department in addition to routine payment of taxes and returns:
| [In search and seizure the officers have Reasons to Believe that there is suppression, misinformation, evasion of tax etc but language of Demand & Recovery starts “Where it appears to the proper officer” this is the basic difference of both sections] |
i. Any tax has not been paid
ii. Tax short paid
iii. Erroneously refunded
[this is very important to note till today in GST returns are being filed on self assessment basis and on portal itself refunds in RFD 01 are being made even exports on LUTs are filed for ITC on exports’ refunds, then there is possibility of Erroneously Refund.]
iv. ITC wrongly availed
Note: This section is also applicable where GSTR 3B filed late it means tax has not been paid and attracts section 132, which will be discussed later.
Section 73(1)- The proper officer – requiring him to show cause (SCN) as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made there under.
SCN will be issued u/r 142 in Form No. GST DRC-01.
Time Limit for Issuing SCN u/s 73(1) read with section 73(10)-up to f.y. 2023-24
At least three months prior to end of three years from the due date of filing the Annual Return for the financial year for which tax found short etc. Kindly also refer to Notification No. 13/2022 Central Tax dated 5th Jul, 2022 (w.e.f. 01.03.2020).
Example: For F.Y. 2021-22 annual return date is 31/12/2022 now count three years from this date that is 31/12/2025 and three months before is 30th September, 2025, so SCN may be issued by department for the F.Y. 2021-22 is 30th September, 2025].
Proper Officer will issue a Statement of calculation of alleging wrong/short tax paid etc in Form No. GST DRC-02
How to avoid SCN (Because SCN has certain consequence):
Section 73 (5) & (6) give a sigh of relief that if before SCN u/s 70(1) or statement u/s 70(3) pay the amount of Tax along with interest u/s 50 of the Act on the basis of own ascertainment and inform the officer in writing of such payment, then SCN can be avoided. [Section 73 is valid till 2023-24]
Here Act is binding to Officers to serve SCN if above course of action is followed by supplier, but note it is restricted only to that amount which is deposited and also note if calculation is differ and liability is more than deposited then he can issue SCN u/s 73(7).
How to avoid PENALTY & Conclude Proceedings:
Section 73(8) helps to avoid penalty payable u/s 50 after SCN issued, it provides if you deposit dues as mentioned in SCN within 30 days of Notice then Penalty can be avoided and all proceedings shall be treated as concluded under said Notice by issuing Form No.GST DRC-05 u/r 142(3) by the proper officer.
In case supplier did not pay tax as above within 30 days and give representation to the Proper Officer then u/s 73(9) he has to pay 10% penalty along with Tax & Interest or Rs.10,000/- whichever is higher. Then Officer will issue order u/s 73(9) u/r 142(4) GST DRC-06 will also up loaded electronically GST DRC 07.
Section 74 Deals with Demand raised by reason of fraud or any wilful-misstatement or suppression of facts to evade tax: up to F.Y.2023-24
Section 74A Deals with Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason: from F.Y. 2024-25
(from f.y. 2024-25 section 73 & 74 has been replaced by section 74A)
Whole procedure of demand is as mentioned above in normal case but certain additional riders are described below:
Time Limit for Issuing SCN u/s 74(2) read with section 74(10): (Up to F.Y.2023-24)
At least SIX months prior to end of FIVE years from the due date of filing the Annual Return for the financial year for which tax found short etc.
Example: For F.Y.2023-24 annual return date is 31/12/2024 now count five years from this date that is 31/12/2029 and six months before is 30th June, 2029, so SCN may be issued by department for the F.Y. 2023-24 is 30th June, 2029].
Time Limit for Issuing SCN u/s 74A(2): From to F.Y.2024-25
The proper officer shall issue the notice under sub-section (1) within forty-two months from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within forty-two months from the date of erroneous refund.
Example: For F.Y.2024-25 annual return date is 31/12/2025 now count 42 months from this date that is 30/06/2029, so SCN may be issued by department for the F.Y. 2024-25 is 30th June, 2029].
How to avoid SCN & Conclude Further Proceedings: up to F.Y.2023-24
Section 74(5) helps to avoid SCN by paying Tax, Interest payable u/s 50 & 15% penalty of such Tax before issuing of notice then No SCN shall be issued but after issuance of SCN Act provides if you deposit dues as mentioned in SCN within 30 days of Notice along with 25% -u/s 74(8) then all proceedings shall be treated as concluded under said Notice (U/s 74(11).
How to pay tax, interest, penalty to Conclude Further Proceedings: from to F.Y.2024-25
Section 74A(5)(i)- For not willful defaults- helps to avoid further coercive actions pay tax, interest payable u/s 50 & 10% penalty of such Tax as per the statement prepared by office u/s 74A(4);
Section 74A(5)(ii)- For willful defaults- helps to avoid further coercive actions pay tax, interest payable u/s 50 & 100% penalty of such Tax as per the statement prepared by office u/s 74A(4);
The above penalty can be avoided u/s 74A(8) for normal default if before issuing statement by officer, the assessee by himself with his own calculation deposit the tax and interest u/s 50 of the Act or within the 60 days of issuing the SCN and inform in writing to the department deposit dues as mentioned in SCN u/s 74A(2) then all proceedings shall be treated as concluded under said Notice (U/s 74A(8)(ii) except proceedings u/s 132.
The section 74A(8)(i) & (ii) (not willful default) related penalty u/s 74A(5)(i) is applicable only when self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax. [u/s 74A(11)]
The above penalty can be reduced u/s 74A(9) for will full default if before issuing statement by officer, the assessee by himself with his own calculation deposit the tax and interest u/s 50 of the Act & 15% penalty or within the 60 days of issuing the SCN along with 25% penalty in addition to tax due & interest u/s 50 of the Act or with 50% penalty in addition to tax due & interest u/s 50 of the Act within 60 days of the communication of the order passed by officer and inform in writing to the department deposit dues as mentioned in SCN u/s 74A(2) then all proceedings shall be treated as concluded under said Notice (U/s 74A(9)(i, ii, iii) except proceedings u/s 132.
Note: the expression “all proceedings in respect of the said notice” shall not include proceedings under section 132;
Supplier shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.
$$ OFFENCES & PENALTIES
(Chapter – XIX –Section 122 to 138 Read with C.G.S.T. Rule – 162)
There are 21 types of Offences described u/s 122(1) which attracts “Penalty” – the quantum of penalty shall be higher of amount as described below:
1. Rs. 10,000/-
2. Amount equivalent to tax evaded
3. Amount equal to Tax should have been deducted u/s 51
4. Amount short deducted u/s 51
5. Deducted but not paid to the Govt.
6. Likewise in TCS
7. The amount of ITC availed wrongly
8. The amount of ITC irregularly distributed
9. Refund amount claimed fraudulently
Summary of 21 offences are as under: it is descriptive in Act but here it is like ready reckoner –
1. Supplies made without issue/incorrect/false invoice
2. Issue any Invoice without supply or contravention to Act
3. Collects tax but not paid beyond 3 months from the due date to Govt
4. Collects tax in contravention of Act but not paid beyond 3 months from the due date to Govt
5. Fails to deduct/less deducted/wrongly deducted and not deposited to Govt
6. Fails to Collect/less collected/wrongly collected and not deposited to Govt
7. ITC availed without actual supply fully or partial in contravention of Act
8. Refund taken fraudulently
9. Take or wrongly distribute ITC in contravention of section 20
10. Play with accounts to evade Tax – fake record/fake accounts/false information
11. Liable for registration in GST but not taken registration
12. False information at the time of registration
13. Stopping to officer to discharge his duties
14. Transport of goods without cover documents
15. Suppress of Turnover to avoid tax
16. Fail to maintain records and books as desired in Act
17. Failed to furnish/produce documents called for by Officer
18. Goods confiscated or liable to confiscate moved or stores other place to avoid seize.
19. Issuing Invoice by using other’s GST No.
20. Tampering or destroying evidence of GST liability
21. Disposed off or tamper goods seized or confiscated
SPECIFIC PENALTY U/S 122(2) – FOR EVASION OF TAX WRONG REFUND:
It deals if tax has not been paid or short paid or wrongly refunded by dept. or wrong ITC availed in situation:
Innocently without wrong intention – Penalty is Rs.10,000/- or 10% of Tax liability whichever is higher {122(2)(a)}
If Willfully or fraud or suppression then Penalty is Rs.10,000/- or equal to tax ascertain whichever is higher. {122(2)(b)}
Section 122(3) Deals penalty to Recipient or Dealing Person:
Rs.25,000/- Penalty is to be paid – If any person knowingly who helps or abets in offences from 1 to 21 above or acquire/transport/dealing in confiscated or liable confiscated goods or supply in contravention to Law or fails to appear before officer or fails to raise Invoice (say without tax paid goods purchased and sold).
Other Penalties:
| Section | Offence | Who is liable | Minimum Rs. | Maximum Rs. |
| 123 | Non filing of information return | Supplier | 100/- per day | 5000 |
| 124 | Information ask u/s 151 – data/statistics etc | Supplier or to whom asked | 10000 + 100 per day | 25000 |
| 125 | Contravention of any Act or Rule of GST | Who contravene | Nil or as per officer | 25000 |
** These are one part of penalty if CGST + SGST taken then above penalties shall be double.
DETENTION OF GOODS IN TRANSIT:
Section 129 deals with detention of moving goods or stored during movement and have two major bifurcations of penalties:
Offence:
Goods in Transit or stored during transport in contravention of any Rule or Act of GST.
(Here important to note language used offences of any contravention means E-Way bill, Invoice, Challan, Transporter or above offences all are covered under this provision)
Penalty Two Type – If owner of goods come forward and accept or otherwise:
1. If Owner come forward and accept his mistake and pay tax + penalty:
Applicable Tax + 200% penalty (in case of exempted goods – 2% of value of goods or Rs. 25000/- whichever is higher.
2. If Owner does not come forward and paid by transporter etc:
Applicable Tax + 50% of value of goods or 200% of tax payable on such goods whichever is higher penalty less by amount paid thereon (in case of exempted goods – 5% of value of goods or Rs. 25000/- whichever is higher.
** If within 7 days of detention tax & penalty is not paid then further action u/s 130 shall be initiated, in case of perishable goods this period may be reduced.
VERY IMPORTANT MISCELLANEOUS SECTION 132
This section is very important here some important offences given which have grave consequences- Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences :
Offences:
a) Supply without issue of invoice or in violation with the intention to evade tax.
b) Issue of Invoice without supply for intention to give benefit of ITC
c) Availing ITC on such invoices (so supplier & recipient both covered)
d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
e) Evade tax or fraudulently obtains refund by other means as not covered above
f) Falsify records, documents etc to evade taxes
g) Obstruct to officer to perform his duty deleted
h) Knowingly get possession of goods which are subject to prohibition by law such as detailed or liable for confiscate.
i) Receives or in any way concerned with supply in contravention of Act, Rule etc.
j) Tampering documents etc deleted
k) Fails to supply information or supply wrong information deleted
l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (f), (h) & (i) of this section,
Arrest for Offences from a to d above:
Section 69 deals with power of arrest, that is as under:
Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person and further procedures of BNSS, 2023 will be followed and will be presented to Magistrate for further action.
The landmark ruling of the honourable Supreme Court of India’s three-judges bench in “Radhika Agarwal v. Union of India”, dated February 27, 2025, addressed arrest procedures. Key excerpts from the judgment clarifying arrest provisions under the GST Act, 2017, are provided below:
MOST PRECIOUS REMARKS OF JUDGES –
Para 13. To sum up, the powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation or non-compliance of the statutory safeguards provided under the special Acts, required to be followed by the authorized officers when an arrest is made of a person prima facie guilty of or having committed offence under the special Act.
Para 12. The arrest under such Special Acts should be exercised very cautiously and in rare circumstances to balance individual liberty with the interest of justice and of the society at large. Any liberal approach in construing the stringent provisions of the Special Acts may frustrate the very purpose and objective of the Acts. It hardly needs to be stated that the offences under the PMLA or the Customs Act or FERA are the offences of very serious nature affecting the financial systems and in turn the sovereignty and integrity of the nation. The provisions contained in the said Acts therefore must be construed in the manner which would enhance the objectives of the Acts, and not frustrate the same.
Para 9. In such cases, the exercise of the power should be confined only to see whether the statutory and constitutional safeguards are properly complied with or not, namely to ascertain whether the officer was an authorized officer under the Act, whether the reason to believe that the person was guilty of the offence under the Act, was based on the “material” in possession of the authorized officer or not, and whether the arrestee was informed about the grounds of arrest as soon as may be after the arrest was made.
To curtail the increasing trend of routine bail applications and arrest challenges, we advise all assessee to carefully review this landmark judgment for guidance before initiating such proceedings.
Penalties for a to l offences above:
i. If amount of tax evaded or ITC utilized > 5 crores – Imprisonment up to 5 years and fine.
ii. If amount of tax evaded or ITC utilized > 2 crores but < 5 crores – Imprisonment up to 3 years and fine.
iii. If amount of tax evaded or ITC utilized > 1 crores but < 2 crores – Imprisonment up to 1 years and fine. [u/s 132(1)(b) 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 leading to wrongful availment or utilisation of input tax credit or refund of tax;]
iv. U/s 132(1)(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 – he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.
** For habitual offenders u/s 132(2) – in second or onward imprisonment may extend to 5 years.
Offences by Companies and Compounding of Offences:
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.
Responsible Officers meaning:
U/s137(2) 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.
Section 137(4) is important to read: 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.
U/s 138 – Compounding r/w Rule 162 & 6 of IGST:
Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner 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. [Form No. GST CPD Rule 162(1)]
Compounding Fee:
Act has provided range of compounding fee as under:
The amount for compounding of offences under this section shall be such as may be prescribed, subject to the minimum amount not being less than 25% of tax involved and maximum 100% of the tax involved.
Benefits of Compounding: [Compounding order come under Form GST CPD u/r 162(3)]
On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this 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.
We trust that this analysis will prompt your consideration of this previously unexplored area, and we welcome your feedback and questions.
*****
Rajiv Nigam, FCA | rajiv@rajivnigamca.com | 9811100737
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