Introduction
Chapter XX of the Model Goods and Services Tax Act, 2016 (‘Act’ for short) provides for prosecution and compounding of offences. In this article the provisions relating to prosecution under this Act are going to be discussed. Section 92(1) provides the list of offences for which punishments is there and provides punishments according to the value involved in the offence. Section 93 provides about cognizance of offences. Section 94 provides the presumption of culpable mental state.
Offences
Section 92(1) of the Act provides the list of offences for which the person concerned is punishable under this Section.
Whoever commits any of the following offence is punishable-
- supplies any goods and/or services without issue of any invoice or grossly misdeclares the description of the supply on invoice, in violation of this provisions of this Act, to intentionally evade tax;
- issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made there under leading to wrongful availment of credit or refund of duty;
- collects any amount as tax but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due;
- collects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of the appropriate Government beyond a period of 3 months from the date on which such payment becomes due;
- takes and/or utilizes input tax credit without actual receipt of goods and/or services either fully or partially, in violation of the provisions of this Act, or the rules made there under;
- evades tax, fraudulently avails input tax credit or obtains refund by an offence not covered above;
- falsifies or substitutes financial records or produces fake accounts and/or documents or furnishes any false information with an intention to evade payment of tax due under this Act;
- obstructs or prevents any officer in discharge of his duties under this Act;
- 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 reason to believe are liable to confiscation under this Act or the rules made there under;
- 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 reason to believe are in contravention of any provisions of this Act or the rules made there under;
- tampers with or destroys any material evidence or documents;
- fails to supply any information which he is required to supply under this Act or the rules made there under 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
- attempts to commit or abets the commission of any of the offences mentioned above.
Punishment
The punishment for the above said offences are as detailed below-
- In cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken-
- exceeds ₹ 2.50 crores – punishment is with imprisonment for a term which may extend to 5 years and with fine;
- exceeds ₹ 1 crore but does not exceed ₹ 2.50 crores – punishment is with imprisonment for a term which may extend to 3 years and with fine;
- exceeds ₹ 50 lakhs but does not exceed ₹ 1 crore – punishment is with imprisonment for a term which may extend to 1 year and with fine.
- The punishment is with imprisonment for a term which may extend to 6 months and/or with fine for the following offences-
- Obstructs or prevents any officer in the discharge of his duties under this Act;
- Tampers with or destroys any material evidence or documents;
- Fails to supply any information which he is required to supply under this Act or the rules made there underor (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.
Subsequent commission of offence
Section 92 (2) provides that if any person convicted of an offence under this section is again convicted of offence under this section, then he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to 5 years and with fine. In the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, the imprisonment referred in Section 92(1) and 92(2) shall not be for a term of less than six months.
Cognizable offences
Section 92(4) provides that the following offences indicated in Section 92(1)-
- supplies any goods and/or services without issue of any invoice or grossly misdeclares the description of the supply on invoice, in violation of this provisions of this Act, to intentionally evade tax;
- issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made there under leading to wrongful availment of credit or refund of duty;
- collects any amount as tax but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due;
- collects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of the appropriate Government beyond a period of 3 months from the date on which such payment becomes due; or
- takes and/or utilizes input tax credit without actual receipt of goods and/or services either fully or partially, in violation of the provisions of this Act, or the rules made there under;
relating to taxable goods and/or services where the amount of tax evaded or the amount of input tax credit wrongly availed or the amount of refund wrongly taken exceeds ₹ 1 crore shall be cognizable and non bailable. The Commissioner concerned shall be the competent authority to take cognizance of the offence.
Section 92(5) provides that a person shall not be prosecuted for any offence under this section except with the previous sanction of the designated authority.
Section 93 provides that no court shall take cognizance of any offence punishable except with the previous sanction of the designated authority and no court inferior to that of a Magistrate of the First Class, shall try any such offence.
Non cognizable offence
Section 92(3) provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973 all offences under this Act, except the offences referred to in Section 92(4) shall be non cognizable.
Culpable mental state
Section 94 provides that if any prosecution for an offence under this Act which requires a culpable mental state (it includes intention, motive, knowledge of a fact and belief in, or reason to believe a fact) on the part of the accused, the Court shall presume the existence of such mental state. 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. A fact is said to be proved only when the Court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.
Higher penalty?
The penalty imposed for the offences seems to be the highest when compared to the provisions of CENVAT Credit Rules, 2004. Rule 15 of CENVAT Credit Rules provide-
Section 11AC(1)(a) provides penalty not exceeding ten per cent of the duty so determined or rupees five thousand, whichever is higher;
Section 11AC(1)(b) provides the amount of penalty liable to be paid by such person shall be twenty-five per cent. of the penalty imposed, subject to the condition that such reduced penalty is also paid within the period so specified;
- In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilized wrongly by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made there under with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of clause (c), clause (d) or clause (e) of sub-section (1) of section 11AC of the Excise Act.
- In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilized wrongly by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made there under with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of sub-section (1) of section 78 of the Finance Act.
Section 78(1) of the Finance Act provides the punishment in addition to the service tax and interest specified in the notice, be also liable to pay a penalty which shall be equal to hundred per cent. of the amount of such service tax.
The punishment imposable under Section 92 should be reconsidered by the authorities concerned.
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