Is the imposition of penalties under section 129(3) of the CGST Act by the Mobile Squad Officer without jurisdiction?
In this article, I have analyzed whether the mobile squad officer has the authority to issue temporary Registration (ID) in their state for imposing penalty under section 129(3) where the supplier, buyer, or transporter is not registered in the state of the Mobile Squad officer, but all three are registered in any other state.
For a better understating of the article, Kindly keep the following facts in mind:
Mr. “S” is a supplier registered in Haryana.
Mr. “B” is a buyer registered in Rajasthan.
Mr. “T” is a transporter registered in Madhya Pradesh.
The Mobile Squad officer (GST Officer) is from Uttar Pradesh (UP)
Goods are being transported from Haryana to Rajasthan by a transporter. While in transit, the Mobile Squad officer from Uttar Pradesh (UP) intercepts the conveyance carrying the goods and examines the accompanying documents. The officer identifies an error (for instance, a mistake in the vehicle number) on the invoice or e-way bill. Thereafter based on these documents, the Mobile Squad officer determined that the buyer is the rightful owner of the goods and imposed a penalty on Mr. “S” under section 129(3) of the CGST Act 2017.
To impose a penalty, the Mobile Squad officer generates a temporary ID and provides Suo Moto registration to Mr. “S” in Uttar Pradesh (UP) State. Following the issuance of the temporary ID, the officer sends a notice under section 129(1) to Mr. “S”. Mr. “S” responds to the notice, and subsequently, the Mobile Squad officer issues an order under Section 129(3). Mr. “S” pays the penalty, and as a result, the Mobile Squad officer releases the goods and the conveyance.
Now, the question arises: Does the GST officer have the jurisdiction to generate a temporary ID in their state (i.e., Uttar Pradesh (UP)) solely to levy a penalty on Mr. “S” under section 129(3) for this transaction?
Relevant Legal Provisions
Section 25 (8) of CGST Act
Where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action which may be taken under this Act or under any other law for the time being in force, proceed to register such person in such manner as may be prescribed
Sub-section 8 of section 25 states that if a person who is liable to be registered under this Act fails to obtain registration, then the proper officer may proceed to register such person. Sections 22 and 24 of the CGST Act enumerate the situations where a person is liable to take registration. Section 22 specifies that if a person crosses the threshold limit of aggregate turnover, he needs to take registration from where he makes a taxable supply. Section 24 of the CGST Act states that a person is liable to be registered irrespective of their aggregate turnover if he falls within any category specified in section 24
Rule 16(1) . Suo moto registration. –
Where, pursuant to any survey, enquiry, inspection, search or any other proceedings under the Act, the proper officer finds that a person liable to registration under the Act has failed to apply for such registration, such officer may register the said person on a temporary basis and issue an order in FORM GST REG-12.
Sub-Rule 1 of Rule 16 stipulates that in the course of a survey, inquiry, inspection, search, or any other proceedings under the Act, if the proper officer determines that a person liable for registration under the Act has not applied for such registration, the officer may provisionally register the said person.
Now the question arises: Did Mr. ‘S’ fail to obtain registration in accordance with the provisions of this Act? The answer is no. Mr. ‘S’ has not failed to register because he was supplying goods from Haryana and making taxable supplies from Haryana. Therefore, he was duly registered in the state of Haryana.
Based on the facts provided, Mr. ‘S’ was never liable to be registered in the state of Uttar Pradesh because he was not doing any supply from Uttar Pradesh.
“Rule 16(1) employs the terms ‘survey,’ ‘enquiry,’ ‘inspection,’ ‘search,’ or any other proceedings under the Act. All these terms indicate that if a person is not registered or fails to obtain registration, the proper officer can register them. These terms imply that if a person is liable to be registered due to reasons such as their aggregate turnover exceeding the threshold limit for registration or being liable for registration under section 24 without any turnover threshold, the proper officer may provisionally register the individual and issue an order in FORM GST REG-12. However, in this specific case, the mobile squad officer is not the proper authority to grant registration.
The intention behind section 25(8) and rule 16(1) is not solely to provide registration for the purpose of collecting penalties under section 129(3) of the CGST Act 2017.
In the author’s opinion, the mobile squad officer is not the appropriate authority to apply section 25(8) in conjunction with rule 16(1) of the CGST Act 2017 to generate a temporary ID in the name of Mr. “S”. The crucial point to note is that while the mobile squad officer is authorized to levy penalties under section 129(3) of the CGST Act, but mobile squad officer is lack of the authority to grant temporary registration to Mr. “S” in Uttar Pradesh.
Here, it is also important to mention rule 87(4) of CGST Rule 2017.
Rule 87 (4) Any payment required to be made by a person who is not registered under the Act, shall be made on the basis of a temporary identification number generated through the common portal.
This rule explicitly states that if a person is not registered under the CGST Act but needs to make a payment under the same Act, then payment can be made by using a temporary identification number generated through the common portal.
However, in the specific case (as fact described in the initial part of this article), where a mobile squad officer in Uttar Pradesh (UP) determines that Mr. ‘S’ is liable for a penalty under section 129(3) of the CGST Act 2017, and Mr. ‘S’ is registered in the State of Haryana, the mobile squad officer should refrain from generating a temporary identification number for the penalty payment as per section 129(3) of the CGST Act 2017. Any such action would constitute a complete violation of rule 87(4) of the CGST Rules 2017.
Conclusion
Based on the foregoing analysis, it is evident that if the supplier, buyer, or transporter is registered in any state other than that of the Mobile Squad Officer, the issuance of a temporary ID by the Mobile Squad Officer in their respective state just to the levy a penalty under section 129(3) of the CGST Act 2017 is beyond their jurisdiction and exceeds their lawful authority.
Above are the personal views of the article writer. It is not a legal opinion. Readers of the article may or may not agree with the authors’ viewpoint. Comments from readers are welcome.
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This article is written by CPA CA Rajesh Kumar Khandelwal. His email address is RKCAMBALLB@GMAIL.COM.
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