ADJUDICATION UNDER GST (PART-9)

[Dr. Sanjiv Agarwal]

Penal Provisions

Penalty for certain offences is governed by Section 122. Sub-section (2) provides for as under:

(2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilized-

(a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher;

(b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher.

Section 122 of CGST Act, 2017 deals with specified offences and penalty imposable on such offences. Sub-section (2) prescribes penalty for offences prescribed under section 73 and 74 of CGST Act, 2017.

Meaning of offences and penalties

The term ‘Offences’ has not been defined under the GST Act. However, the dictionary meaning of the term ‘offence’ is an illegal act or a breach of law or rule. The courts have interpreted this term as violation of any law of the land for which law prescribes penalty. According to section 3(38) of the General Clauses Act, 1897, ‘offence’ shall mean any act or omission made punishable by any law for the time being in force.

There is an essential distinction between an offence and the prosecution for an offence. The former forms part of the substantive law and the letter of procedural law. An offence is an aggregate of acts or omissions punishable by law while prosecution signified the procedure for obtaining an adjudication of Court in respect of such acts or omissions. (KAPUR CHAND POKHRAJ VERSUS THE STATE OF BOMBAY - 1958 (3) TMI 50 - SUPREME COURT).

The term ‘penalty’ has not been defined under the GST Act. The dictionary meaning of the word ‘penalty’ means a punishment for breaking a law, rule or a contract. The term ‘penalty’ has also been defined as a punitive measure that the law imposes for the performance of an act that is prescribed or for the failure to perform a required act.

In the context of revenue law, penalty can be described as a punishment, monetary or otherwise, to a person for violating the provisions of law or for not doing any act which was expected of him or doing an act which was not expected of him.

Penalty for offences under section 73 and 74 of CGST Act, 2017

According to sub-section (2) of section 122 of CGST Act, 2017, section 73 of the GST Act deals with tax not paid or short paid, erroneously refunded or wrong availment or utilization of input tax credit for reasons other than fraud, willful misrepresentation or suppression of facts to evade tax. The penalty in this case has been prescribed in section 73 as INR 10,000/- or 10% of the amount of tax due from such person, whichever is higher.

Section 74 of the GST Act deals with tax not paid or short paid, erroneously refunded or wrong availment or utilization of input tax credit for reasons of fraud, willful misrepresentation or suppression of facts to evade tax. The penalty has been prescribed in the sec 74 as INR 10,000/- or amount of tax due from such person, whichever is higher.

Quantum of Penalty

Though specific penalties have been prescribed for different situations as specified in section 73 and 74 of CGST Act, 2017, section 122(2) of CGST Act, 2017 provides for specific penalties in both the situations as stipulated in section 73 and 74 of CGST Act, 2017 irrespective of different penalties specified in those sections.

This penalty shall be levied on any registered person supplying goods or services or both which shall be as under:

S.No.	Situation	Penalty
a)	For any reason other than fraud / willful misstatement /  suppression of facts with intent to evade tax	Rs. 10,000 or 10% of tax due, whichever is higher
b)	For reason of fraud / willful misstatement / suppression of facts with intent to evade tax	Rs. 10,000 or the tax due, whichever is higher

Note: According to section 75(13) of CGST Act, 2017, it has been provided that if any penalties has been imposed under sections  73 and 74 of CGST Act, 2017, on the same person and for the same offence, no penalty can be imposed under any other section of the Act. This implies that penalties under section 122 (2) will also not be imposed if the same has been imposed under sections 73 and 74 of CGST Act, 2017.