OFFENCES UNDER GST LAW (PART-4)

[Dr. Sanjiv Agarwal]

OFFENCES UNDER GST LAW (PART-4)

(Compounding of Offences and Restrictions)

Meaning of ‘Compounding’

‘Compounding’ has not been defined in GST Act or Rules. However, ‘Compounding’ means payment of monetary compensation or fine, instead of undergoing prosecution for an offence committed, which warrants such prosecution.

Section 320 of the Code of Criminal Procedure defines ‘compounding’ as to forbear from prosecution for consideration or any private motive. Aiyar’s Law Lexicon defines it variously as “arranging, coming to terms; condone for money”. Compounding is thus, a legally recognized arrangement, whereby the person charged with an offence is offered the option of avoiding prosecution and imprisonment in lieu of monetary considerations by way of penalty; compounding is essentially a contract between the state and the offender whereby the state secures revenue and the offender secures immunity from prosecution.

Compounding is nothing but a sort of compromise between the offender and the department to avoid criminal proceedings and is a punishment outside the court proceedings. Oxford Dictionary defines it as ‘forbear from prosecuting in exchange for money or other consideration; condone for money’. Compoundable offence is an offence which the law allows to be compounded between the parties; an offence which is capable of being compounded.

Scope of Compoundable Offences [Section 138(1)]

Any offence under CGST Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed.

As per section 138(1) of the CGST Act, 2017, any offence under the Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed.

Thus, compounding of offences can be done:

(a)  by the Commissioner,

(b)  on payment of compounding amount,

(c)  either before or after the institution of prosecution,

(d) in the prescribed manner.

It may be noted that payment should be made by the person (accused of the offence) to the Central Government or State Government in respect of CGST or SGST respectively. However, such compounding is subject to certain exceptions and conditions.

Exclusions/Restrictions on Compounding (Sub-section 1)

Compounding of offences, as per proviso to section 138(1) of the GST Act, 2017 shall not apply in the following cases (upto 30.09.2023)

1. a person who has been allowed to compound once in respect of the specified offences under section 132(1) (a to f) and (l) related to such offences of the GST Act.
2. a person who has been allowed to compound once in respect of any offence [other than those in clause (a) above] under the Act or under the provisions of any other SGST Act or IGST Act or UTGST Act in relation to supplies of value exceeding INR one crore.
3. a person who has been accused of committing an offence under the Act which is also an offence under any other Act.
4. a person who has been convicted for an offence under this Act by a court.
5. a person who has been accused of committing an offence specified in clause (g) or clause (j) or clause (k) of sub-section (1) of section 132.
6. any other class of persons or offences as may be prescribed.

Specified offences as mentioned in (a) above are offences mentioned in clauses (a) to (f) and offences under clause (l) of section 132(1) which are relatable to offences in clauses (a) to (f) of section 132(1) of the CGST Act, 2017(i.e. attempt to commit or abet the commission of such offences).

The offences listed in section 132(1) are as follows:

1. supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax.
2. 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 leading to wrongful availment or utilisation of input tax credit or refund of tax.
3. avails input tax credit using such invoice or bill referred to in clause (b).
4. 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.
5. evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d).
6. falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act.
7. obstructs or prevents any officer in the discharge of his duties under this Act.
8. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder.
1. receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder.
10. tampers with or destroys any material evidence or documents.
11. fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
50. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) above.

It may be noted that sub-section (1) has been amended by the Finance Act, 2023 w.e.f. 01.10.2023

Consequences of compounding [Section 138(3)]

In terms of section 138(3) of the CGST Act, 2017, on payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under the Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.