PENALTY UNDER SECTION 122(1)(II) OF THE GST ACT, Goods and Services Tax - GST

[Sadanand Bulbule]

Dear experts

Section 122(1)(ii) of the GST Act speaks about the offence of "issue of invoices without the supply of goods or services or both". However in exceptional cases, such invoices do not lead to the wrongful availment or utilisation of input tax credit. The CBIC Circular No. 171/03/2022 dated 06/07/2022 has illustrated such kind of events for the purpose levy of only penalty in a particular situation or adjudication under Section 74 and levy of penalty under section 122(1)(vii) in proven situations of wrongful availment or utilisation of input tax credit.

Query:

What is the amount of penalty under Section 122(1)(ii) for the offence of issue of invoices without the actual supply of goods or services or both not leading to the wrongful availment or uitlisation of input tax credit?

Experts to throw spotlight.

Posts / Replies

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, As per Board's circular this transaction falls under the category of non-fraud, it being without tax and without involvement of wrongful ITC. So penalty of Rs.10,000/- is imposable under Section 122(1) (ii) but in my view such transaction is covered under Section 122 (3) (e) and penalty of Rs.25,000/- is imposable.

Therefore, in my view Board's circular is required to be either amended to this extent or withdrawn.

[KASTURI SETHI]

When we talk of 'fake' invoice, the element of 'intentional untrue' is present. In my view, even the penalty of Rs.25,000/- is not sufficient in this scenario.. Keeping in view the gravity of the offence such meagre penalty does not meet the ends of justice.

[Sadanand Bulbule]

Dear Sirji

Thank you so much for throwing spotlight on the issue. But Sir, as long as the provisions of Section 122 remain unchanged, in my personal opinion the CBIC need not think of amending or withdrawing it to that extent.

Warm regards

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Agreed, Sir. You mean to say that problem is inherent in Section 122 and NOT in circular. So Section 122 is the 'cause' and 'cause' requires the 'treatment' for the solution of the problem.

[Sadanand Bulbule]

Dear Sir

Yes Sir. It is the prerogative of the GST Council and the law makers. CBIC can clarify the law, but not beyond that per say.

[Amit Agrawal]

Relevant portion from Section 122(1)(ii) reads as under:

"122. (1) Where a taxable person who––

............................

(ii) 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;

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he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher."

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KALLESHAMURTHY MURTHY]

Sri Amit Agarwal Ji has rightly extracted the penalty provision under GST.

Where Sec. 73 is initiated, if tax liability does not exceed Rs. 10000-00, the imposition of penalty will be at Rs. 10000-00 or equivalent to tax when this limit exceeds.

This is my understanding of the law.

[Sadanand Bulbule]

Dear all

Assuming but not accepting that, none of the ingredients like tax evasion or non deduction of tax under section 51 or short deduction or deduction but not payment to the Government or non collection of tax under section 52 or short collection or collection but not payment to the Government or input tax credit availment of or passing on or distribution of tax irregularly or the claim of refund fraudulently are manifest on record as prescribed 122, then what should be penalty ?

[Sadanand Bulbule]

Dear experts,

While continuing the discussion on the subject I wish to add here that, Section 74 of the GST Act comprises following explanation:

Explanation 1.- For the purposes of section 73 and this section,-

(i) XXXX

(ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122 and 125 are deemed to be concluded.

Thus there is statutory immunity from the levy of penalty under Section 122 against all the persons [other than the main person] in the chain of all proven offences under Section 122 and particularly under sub-section 122[1][ii] & 122[1][vii].

Query:

1] How such statutory immunity from the levy of penalty under Section 122 by virtue of Explanation-1 to Section 74 against all persons [other than the main person] can be ensured/expanded keeping in mind the CBIC Circular No 171/03/2022 dated 06/07/2022?

2] Whether CBIC Circular No.171 syncs with the object of Explanation-1 above or come into conflict ?

Experts are welcome with their comprehensive thoughts on this.

[Sadanand Bulbule]

Dear all

Further to add-

Section 75(13) read as under:

Where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.

 

[KALLESHAMURTHY MURTHY]

Dear Sirs,

I wish to add that in my reply No. 7 dated 1-01-2024, I missed to mention the penalty payable u/s 73 is equal to ten per cent of tax when the tax amount exceeds Rs. 10000-00.

[Sadanand Bulbule]

Dear all

On the issue of levying penalty under Section 122 (1) [ii] & 122(1) [vii] of the CGST Act, 2017, plz refer the following:

2024 (3) TMI 1277 - BOMBAY HIGH COURT

SHANTANU SANJAY HUNDEKARI, VIKAS AGARWAL, YOGESH AGARWAL, MAMTA GUPTA VERSUS UNION OF INDIA, THROUGH SECRETARY, MINISTRY OF FINANCE, NEW DELHI., STATE OF MAHARASHTRA, JOINT DIRECTOR, DIRECTOR GENERAL OF GOODS AND SERVICE TAX INTELLIGENCE, GUJARAT. THE ADDITIONAL/JOINT COMMISSIONER, THANE COMMISSIONERATE,