There are some opinions that levy of penalty under GST is an independent one, no connection with tax liability. In general a penal action is based on an offence committed under the act or violation of act and rules. Unless there is violation there may not be penal action under GST Act.
Section 73, 74 and 74A specifies the reason for penalty.
Section 73 (8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded
In other cases the penalty is applicable either under section 74 or 74A of the Act.
And as per Section 75 (13) Where any penalty is imposed under section 73 or section 74 1[or section 74A], no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act
Therefore it is an important provision under GST Sec 75(13) that once the penalty is levied and collected either under any of the above sections no penalty for the same act or omission shall be imposed. So the penalty for certain offences under section 122 is not a charging section like section 73/74/74A. Charging section means a provision that legally creates the LEVY OF TAX and liability to pay that tax.
Let us discuss how section 122 indicate the imposition of penalty on certain tax liabilities.
Section 122 – Penalty for Certain offences.
(1) Where a taxable person who-
(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
*Evasion of tax, can be recovered under section 74 or 74A.*
(ii) 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;
Wilful evasion of tax, can be recovered under section 74 or 74A.
(iii) 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;
*Evasion of tax, can be recovered under section 73/74/74A.
(iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
*wilful evasion of tax can be recovered under section 74 or 74A.
(v) 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;
Contravention of the provisions of act can be recovered under section 73/74/74A.
(vi) fails to collect tax in accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section 52;
Contravention of the provisions of act with liability can be recovered under section 73/74/74A
(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;
Contravention of the provisions of act with liability can be recovered under section 73/74/74A.
(viii) fraudulently obtains refund of tax under this Act;
Wilful intention to gain additional tax benefit can be recovered under section 73/74/74A.
(ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;
Contravention of the provisions of act with liability can be recovered under section 73/74/74A.**
(x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act;
Wilful Evasion of tax, can be recovered under section 74 or 74A.
(xi) is liable to be registered under this Act but fails to obtain registration;
Liable to tax under section 63 of GST and can be recovered under Section 74 or 74A
(xii) furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently;
Wilful evasion of tax. Can be recovered under section 74 or 74A.
(xiii) obstructs or prevents any officer in discharge of his duties under this Act;
Contravention of the provisions of act with liability can be recovered under section 73/74/74A
(xiv) transports any taxable goods without the cover of documents as may be specified in this behalf;
Intention to evade the tax can be recovered under section 129.
(xv) suppresses his turnover leading to evasion of tax under this Act;
Tax can be recovered under section 73/74/74A.**
(xvi) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder;
Contravention of the provisions of act with liability can be recovered under section 73/74/74A.
(xvii) fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act;
Evasion of tax can be recovered under section 60/61/73/74/74A.**
(xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act;
Evasion of tax can be recovered under section 74 or 74A.
(xix) issues any invoice or document by using the registration number of another registered person;
Wilful evasion of tax can be recovered under section 73/74/74A.
(xx) tampers with, or destroys any material evidence or document;
Wilful evasion of tax can be recovered under section 74 or 74A
(xxi) disposes off or tampers with any goods that have been detained, seized, or attached under this Act, Wilful evasion of tax can be recovered under section 74 or 74A
Therefore tax and penalty levied and collected under sections 73, 74 and 74A are governed by section 122. since section 122 can not create any tax liability. It will indicate the imposition of penalty only, where a contravention is existed.
Section 129 penal action – No penalty with out an intention to evade tax ,
(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,––
This section is linked with intend to evade the tax.
HIGH COURT OF KERALA M/S.T.P.METALS & ROOFINGS Vs ASSISTANT TAX OFFICER (INT), this writ petition is allowed. Ext.P10 is quashed. It is declared that the provisions of Section 129 of the CGST/SGST Acts do not authorise the imposition of tax/penalty as contemplated by the provisions of Section 129(1)(a) or Section 129(1)(b) in cases where only minor discrepancies are noticed and such penalty can be imposed only for violations which may lead to evasion of tax or where the transport was with an intent to evade tax or in cases of repeated violations (even of a minor nature). In other cases, the authorities will impose penalties having due regard to the provisions of Sections 122 and 126 of the CGST/SGST Acts.
Allahabad high court judgment on M/s Globe Panel Industries India Pvt. Ltd. vs. State Of U.P. And Others 2024. Since the authorities had failed to make a case of intention to evade tax, the Court held that penalty under Section 129(3) cannot be imposed based on technical errors. Accordingly, the penalty order and the subsequent order of the appellate authority were quashed.
Allahabad High court M/s GLOBE PANEL INDUSTRIES INDIA PVT. LTD Vs STATE OF U.P. AND OTHERS:- Accordingly, this Court is of the view that such a technical violation by itself without any intention to evade tax cannot lead to imposition of penalty under Section 129(3) of the Act. This view is fortified by a catena of judgments as indicated above.
General Penalty under section 125
Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees.
So implementation of this section 125 to levy tax may not warranted when section 73,74,74A, 122 and 129 having specific penal provisions. This general penalty can not override the specific provisions under the act. It does not independently authorize recovery of adjudication of tax without substantive proceedings under charging and assessment proceeding. Therefore its role is very limited for which no penalty is separately provided in the act.
Conclusive opinion
Penalties cannot be imposed under the GST Act without establishing a deliberate intent to evade tax, mens rea, or an actual tax liability. Minor, bona fide clerical or documentation errors do not attract penal provisions without proof of evasion
Authors:
S.V.S. Raghavendra Rao, Advocate & Tax Consultant, Nellore, Andhra Pradesh, Phone: 9440275175, Email: raghuvatconsultancy@yahoo.com
S.V.S.N. Sasidhar Rao, Chartered Accountant, Nellore, Andhra Pradesh, Phone: 9490087873, Email: sasidharca1@gmail.com.
Author Bio
