POWER TO IMPOSE PENALTY IN CERTAIN CASES UNDER GST LAW

[Dr. Sanjiv Agarwal]

Statutory provision

Power to impose penalty in certain cases is provided for in Section 127 of CGST Act, 2017 which states as under:

Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person.

Meaning of Penalty

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 proceedings can be initiated under section 127 even if the same are not covered under the following sections:

1. section 62: Assessment of non-filers of returns
2. section 63: Assessment of unregistered persons
3. section 64: Summary assessment in certain special cases
4. section 73: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful misstatement or suppression of facts.
5. section 74: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfull misstatement or suppression of facts
6. section 129: Detention, seizure and release of goods and conveyances in transit
7. section 130: Confiscation of goods or conveyances and levy of penalty

This section appears to be a residual section which empowers the proper officer to levy a penalty on a taxable person even when that person is not covered under any penalty for offences under the aforementioned sections.

Therefore, it is a residual provision for imposing penalty for any offence but the officer should ensure that provisions of section 126 of CGST Act, 2017 regarding general disciplines are observed and the order of penalty is issued only after providing him a reasonable opportunity of being heard by following the principles of natural justice.

When penalty is not leviable

In other words, penalties can be imposed by proper officer after giving due opportunity even in cases where there are no proceedings open with regard to assessment, adjudication, detention or confiscation, as the case may be.