Simplified GST Series /Offences & Penalties /Section 134-138/CGST ACT 2017

Article explains Provisions of Section 134- Cognizance of offences, Section 135- Presumption of culpable mental state, Section 136- Relevancy of statements under certain circumstances, Section 137- Offences by Companies  and Section 138- Compounding of offences.

Section 134- Cognizance of offences-

No Court shall take cognizance of any offence punishable under this Act or the rules made thereunder except with the previous sanction of the Commissioner, and no court inferior to that of a Magistrate of the First Class, shall try any such offence.

Analysis- Any offence under the Act or Rules can be tried only before a Court not lower than the Court of Judicial Magistrate of First Class. Further, previous sanction of the Commissioner is mandatory in every such case.

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Section 135- 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.

Analysis- In case of any prosecution which requires the existence of a culpable mental state, the Court would presume the existence of it. The accused can prove that he had no such mental state in respect of a particular act for which he is charged. The expression “culpable mental state” is defined inclusively to cover “intent, motive, knowledge of fact, belief in or reason to believe”. However, presumption does not mean assumption of mental state to commit the offence. It is only that it is a rebuttable presumption.

Section 136- Relevancy of statements under certain circumstances-

A statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings 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 interest of justice.

Analysis- A statement recorded during an investigation proceedings or inquiry will be relevant to prove the truthfulness of facts when:

(a) It is made by a person who is not available in Court on account of his death, incapacity,prevention by another party or when he absconds or when presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable or

(b) The Court consider the statement as an evidence on examination of the person as a witness.

Section 137- Offences by Companies:

This section comes down heavily on the persons who take shelter on the principle of separate legal status of artificial judicial persons and back out of their responsibility of payment of dues of the Government.

  • This section states that where an offence is committed by companies, every person/ director/ manager/ secretary or any other officer who at the time of commitment of the offence, 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 such offence and shall be liable to proceeded against and punished accordingly.
  • Where such offences are committed by the person being Partnership Firm, LLP, HUF or trust, then the Partner or Karta or Managing Trustee (as the case may be) shall be deemed to be guilty and liable to be proceeded against and punished.
  • Further, if the accused person proves that he was in no way related to the offence being committed or he had exercised all possible measures to prevent commission of such offences, then he is not punishable under this section.

Section 138- Compounding of offences-

This provision deals with compounding of offences by payment of the prescribed compounding fees.

  • Compounding of an offence means payment of a sum of money in monetary terms instead of undergoing prosecution. Application for compounding of an offence can be either before or after institution of the prosecution proceedings.
  • Specified offences can be compounded only once.
  • As per Rule 162 of the GST Law, the application of compounding shall be filed in FORM GST-CPD-01
  • 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 relevant information for the examination of such application.
  • After providing opportunity of being heard to the applicant and taking into account the contents of the application, if satisfied that the applicant has co-operated in the proceedings before him and has made full and true disclosure of facts relating to the case. Commissioner may by order in FORM GST-CPD-02 allow the application indicating the compounding amount and grant him immunity from prosecution or reject such application within 90 days of the receipt of the application stating the grounds of rejection.

However, the application shall not be allowed unless the tax, interest and penalty liable to be paid, has been paid in case for which the application has been made

  • Immunity granted to applicant may, at any time be withdrawn by Commissioner, if he is satisfied that such person had, in the course of compounding proceedings, concealed any material particulars or had given false evidence.
  • The applicant, within a period of 30 days from the date of receipt of order allowing compounding, shall pay the compounding amount as ordered by the Commissioner and shall furnish the proof of such payment to him.
  • On payment, the proceedings indicated will abate and no criminal proceedings can be Launched.

The amount of compounding of offences under this section shall be such as may be prescribed, subject to

  • The minimum amount not being less than ` 10,000 or 50% of tax whichever is higher and
  • The maximum amount not being less than ` 30,000 or 150% of tax whichever is Higher.
  • Compounding of offences is not permissible to the following offences:

(i) A person who has compounded once in respect of supply value exceeding ` One Crore.

(ii) A person who is convicted by a Court under this Act.

(iii) A person permitted to compound offences once in respect of offences specified in clauses (a) to (f) of section 132(1) and offences specified in clause (l) which are relatable to offences specified in (a) to (f).

(iv) A person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force.

(v) A person who has been accused of committing an offence in section 132(1)(g) or 132(1)(j) or 132(1)(k)

(vi) Prescribed class of persons.

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October 2021