NON COGNIZABLE OFFENCES UNDER GST

[Mr. M. GOVINDARAJAN]

Types of offences

The criminal offences are of two types viz., cognizable offence and non cognizable offence.   The features of cognizable offences are as follows-

• Cognizable offence means an offence for which a police officer may, in accordance with the First Schedule or under any other law for the time being in force, arrest without a warrant..
• Cognizable offences are those offences which are serious in nature. Example- Murder, Rape, Dowry Death, Kidnapping, Theft, Criminal Breach of Trust, Unnatural Offences.
• Section 154 of CrPc provides that under a Cognizable offence or case, the Police Officer has to receive the First Information Report (FIR) relating to the cognizable offence, which can be obtained without the Magistrate’s permission and enter it in the General Diary to immediately start the investigation. An FIR sets the criminal law in motion.
• If a Cognizable offence has been committed, a Police Officer can investigate without the Magistrate’s permission.

The features of non cognizable offences are as follows-

• A non-cognizable offence has been defined in Criminal Procedure Code as follows- as a case in which, a police officer has no authority to arrest without a warrant.
• Non-Cognizable offences are those which are less serious in nature. Example- Assault, Cheating, Forgery, Defamation, etc.
• Section 155 of CrPc provides that if a police officer receives information regarding the commission of a non-cognizable offence, he is supposed to enter the substance of the case in the station diary and refer the informant to approach the concerned Magistrate.  
• Under a Non-Cognizable offence/case, in order to start the investigation, it is important for the police officer to obtain the permission from the Magistrate.

Punishment for certain offences under GST

Section 132 of the Central Goods and Services Tax Act, 2017 provides punishment for certain offences.  Section 132 (1) provides that whoever commits any of the following offences, namely-

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 there under, 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 there under leading to wrongful availment or utilization 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 there under;
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 there under;
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 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
50. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section,

shall be punishable–

1.  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 five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;
2. 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 two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;
3.  in the case of any other offence 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 one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine;
4.  in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.

Section 132 (5) provides that the offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.  Section 132 (4) provides that  notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.

Non cognizable offence

Usually the non cognizable offences are tried by the police officer with the permission of the Magistrate.  Section 132(6) of CGST Act provides that a person shall not be prosecuted for any offence under this section except with the previous sanction of the Commissioner.

How to determine whether the offence committed under GST law is a non cognizable offence.   We have to apply section 132 of the Act and to consider the nature of offence and the punishment available to such offence.  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 five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine such offences are treated as cognizable offense.   Other offences which involve the amount less than five hundred lakh rupees and the punishment is three years or less are considered as non cognizable offences.

In ‘Avinash Aradhya v. Commissioner of Central Tax, Bangaluru’ – 2019 (3) TMI 373 - KARNATAKA HIGH COURT the companies of Aradhya group along with Spiegel Enterprises Private Limited, Bhavasteel Metalalloys Private Limited, Infocert Enterprises, Bhavani Steel Corporation, Vijayalakshmi Enterprises were indulging in continuous issuance of fake invoices without actual supply of goods with an intention to enable them fraudulently avail the input tax credit.  It is alleged that the act is an offence and it is criminal nature.   On the basis of this a complaint was registered.

The petitioners-accused under section 438 of CrPC filed the present writ petitions before the High Court with the prayer to release them on anticipatory bail in the event of their arrest by the respondent for the offence punishable under section 137 of the CGST Act.  The petitioners submitted the following before the High Court-

• As per the GST Act, the maximum punishment which is liable to be imposed even if an offence has been made out and convicted is five years and ever as per section 138 of the CGST Act.
• The said offence is compoundable before the Commissioner on payment.
• Even there is no irregularity no loss of revenue has been caused to the State or Central Government.
• They have paid GST by creating invoice.
• The accused have not availed any loan or not raised any amount in the bank, even in the put tax, the credit also has been given and that has not been deducted or claimed from the State or Central Government.
• They are apprehending their arrest.
• They are not the defaulter to the bank or to the State.
• They have given only inflated transaction, therefore, that input tax credit and the sale is not an offence under the GST Act.
• They are ready to abide by the terms and conditions to be imposed by the High court and ready to offer security.

On the above grounds the petitioners prayed to allow the petition and to release them on bail.

The Revenue submitted the following before the Supreme Court-

• If the entire case is looked into without there being any movement of goods, the petitioners have claimed input tax credit and thereby without payment of any tax by them, they claimed input tax credit.
• Though the contention of the petitioners is that the input tax credit has been paid, but actually, no tax has been paid to anybody.
• It is only a paper transaction and it is going to affect the trade transfer of the nation and in the State.
• It is a scam and if it is allowed to be continued then it will be having its own cumulative effect on the economy as a whole.
• Still investigation is in progress and if the petitioners accused are released on bail, it is going to affect the entire investigation and they may tamper with the prosecution case.

On the above grounds, the Revenue prayed the High Court to dismiss the petition.

The High Court analyzed the provisions of GST Act with reference to non cognizable offence.  The High Court observed that the alleged offences in this case are compoundable by the Commissioner on payment and maximum punishment of five years with fine and they are not punishable with death or imprisonment for life.  When the maximum punishment which can be imposed is only up to five years with fine, it will throw light on the seriousness of the offence.  The High Court rejected the contention of the Revenue that it will be having its own cumulative effect on the economy as a whole since no material is produced to show the magnitude of the loss of revenue going to be caused and the manner which in which it will affect the economy of the country.  This is the matter that has to be considered and appreciated only when the entire investigation is completed and full charge sheet is filed.  At present the Court deals with only anticipatory bail application, what are the parameters which can be taken into consideration.

By taking into consideration the gravity of the offence and punishment which is liable to be involved, the Court considered that by imposing some stringent conditions, if accused petitioners are ordered to be released on bail, it will meet the ends of the justice.   The High Court ordered that the petitioners are allowed to be enlarged on the anticipatory bail in the event of their arrest for the offence punishable under section 137 of the CGST Act, 2017 subject to the following conditions-

• Each of the petitioners shall execute a person bond for a sum of ₹ 5 lakhs with two sureties for the like sum to the satisfaction of the apprehending authority.
• They shall surrender before the Investigating Officer within 15 days from today.
• They shall not tamper with the prosecution evidence or any documents whichever is required for the purpose of investigation
• They shall co-operate during the course of investigation and they shall not leave the country without prior permission of Special Court for Economic Offences.
• They shall not indulge in similar type of criminal activities covered under the said Act.