CBIC GUIDELINES ON PROSECUTION UNDER GST LAW

[Dr. Sanjiv Agarwal]

In any tax law, tax evasion as well as detection and investigation both are present and go hand-in-hand. It is obvious that tax evasion ought to be curbed at all costs and this may require severe and harsh action on the part of tax collectors and regulators. This includes inspection, investigation and search. This is followed by prosecution under section 132 of CGST Act, 2017 against the offenders.

Sanction of Prosecution

CBIC has issued a set of detailed instruction / guidelines for launching of prosecution under section 132 read with sections 137, 138 and 139 of the CGST Act, 2017.

Section 132 of CGST Act, 2017 codifies the offences under GST law requires initiation of criminal proceedings and prosecution. Accordingly,

• The nature of evidence collected during the investigation should be carefully assessed.
• Decision should be taken on case-to-case basis considering various factors, such as, nature and gravity of offence, quantum of tax evaded, or ITC wrongly availed, or refund wrongly taken and the nature as well as quality of evidence collected.
• Prosecution should not be filed merely because a demand has been confirmed in the adjudication proceedings. Prosecution should not be launched in cases of technical nature, or where additional claim of tax is based on a difference of opinion regarding interpretation of law.
• In the case of public limited companies, prosecution should not be launched indiscriminately against all the Directors of the company but should be restricted to only persons who oversaw day-to-day operations of the company and have taken active part in committing the tax evasion etc. or had connived at it.
• Decision on prosecution should normally be taken immediately on completion of the adjudication proceedings, except in cases of arrest where prosecution should be filed as early as possible.
• In cases where any offender is arrested under section 69 of the CGST Act, 2017, prosecution complaint may be filed even before issuance of the Show Cause Notice.

Launch of Prosecution

• Prosecution should normally be launched where amount of tax evasion, or misuse of ITC, or fraudulently obtained refund in relation to offences specified under sub-section (1) of section 132 of the CGST Act, 2017 is more than Rs. 5 crore.
• Monetary limit shall not be applicable in case of:

• Habitual evaders -A company/taxpayer would be treated as habitual evader, if it has been involved in two or more cases of confirmed demand (at the first adjudication level or above) of tax evasion/fraudulent refund or misuse of ITC involving fraud, suppression of facts etc. in past two years such that the total tax evaded and/or total ITC misused and/or fraudulently obtained refund exceeds Rs. 5 crores. DIGIT database may be used to identify such habitual evaders.
• Arrest cases -Cases where during the course of investigation, arrests have been made under section 69 of the CGST Act.

Procedure for sanction of Prosecution

• Prosecution should be filed only after obtaining the sanction of the Pr. Commissioner/Commissioner of CGST in terms of section 132(6) of CGST Act, 2017.
• In DGGI cases, prosecution should be filed only after obtaining the sanction of Pr. Additional Director General/Additional Director General, Directorate General of GST Intelligence (DGGI) of the concerned zonal unit/ Hqrs.
• Where during the course of investigation, arrest(s) have been made and no bail has been granted, all efforts should be made to file prosecution complaint in the Court within sixty (60) days of arrest. In all other cases of arrest, prosecution complaint should also be filed within a definite time frame.
• In cases investigated by DGGI wherever an arrest has been made above procedure should be followed by officers of equivalent rank of DGGI.

Filing of Prosecution

• In the case of Companies, both the legal person as well as natural person are liable for prosecution under section 132 of the CGST Act. Under section 137(3), the provisions have been made for partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a Trust.
• Where it is deemed fit to launch prosecution before adjudication of the case, the Additional/Joint Commissioner or Additional/Joint Director, DGGI, as the case may be, supervising the investigation, shall record the reason for the same and forward the proposal to the sanctioning authority.
• The adjudicating authority should invariably indicate at the time of passing the order itself whether it considers the case fit for prosecution, so that it can be further processed and sent to the Pr. Commissioner/ Commissioner for obtaining his sanction of prosecution.
• Where at the time of passing of adjudication order, no view has been taken on prosecution by the Adjudicating Authority, the adjudication branch shall re-submit the file within 15 days from the date of issue of adjudication order to the Adjudicating Authority to take a view on prosecution.
• Once the sanction for prosecution has been obtained, prosecution in the court of law should be filed as early as possible, but not beyond a period of sixty days by the duly authorized officer (of the level of Superintendent).

Filing appeals & withdrawal of prosecution

• For appeal against court order in case of inadequate punishment / acquittal, Prosecution Cell shall submit its recommendation to Principal Commissioner / Commissioner if it is of the opinion that accused person has been let off with lighter punishment than what is envisaged in the Act or has been acquitted despite the evidence being strong, filing of appeal should be considered against the order within the stipulated time.
• In DGGI cases, Prosecution Cell in the Directorate shall examine the judgment of the court and submit their recommendations to the Pr. Additional Director General/ Additional Director General who shall take a view regarding acceptance of the order or filing of appeal.
• Principal Chief Commissioner / Chief Commissioner shall sanction withdrawal of prosecution based on Commissioner’s report, new evidences and facts.
• In case of DGGI cases, Principal Director General shall be the competent authority to sanction withdrawal of prosecutions.
• Where it is found on merit that there is no contravention of the provisions of the Act in the adjudication proceedings and such order has attained finality, Pr. Commissioner/ Commissioner or Pr. Additional Director General/ Additional Director General after taking approval of Pr. Chief Commissioner/ Chief Commissioner or Pr. Director General/ Director General, as the case may be, would ensure filing of an application through Public Prosecutor in the court to allow withdrawal of prosecution in accordance with law.
• The withdrawal can only be affected with the approval of the court.

General Guidelines

• It shall be the responsibility of the officer who has been authorized to file complaint, to take charge of all documents, statements and other exhibits that would be required to be produced before a Court. The list of exhibits etc. should be finalized in consultation with the Public Prosecutor at the time of drafting of the complaint.
• Where a complaint has not been filed even after a lapse of 60 days from the receipt of sanction for prosecution, the reason for delay shall be brought to the notice of the Pr. Commissioner/ Commissioner or the Pr. Additional Director General/ Additional Director General of DGGI by the Additional/ Joint Commissioner in charge of the Commissionerate or Additional/ Joint Director of DGGI, responsible for filing of the complaint.
• Filing of prosecution need not be kept in abeyance on the ground that the taxpayer has gone in appeal/ revision.
• The Superintendent in charge of prosecution section should monitor receipt of all serially numbered adjudication orders and obtain copies of adjudication orders of missing serial numbers from the adjudication section every month.
• Section 159 of the CGST Act, 2017 grants power to the Pr. Commissioner/Commissioner or any other officer authorised by him on his behalf to publish name and other particulars of the person convicted under the Act. In deserving cases, the department should invoke this section in respect of all persons who are convicted under the Act.
• Prosecution, once launched, should be vigorously followed.
• Section 138 of the CGST Act, 2017 provides for compounding of offences by the Pr. Commissioner/ Commissioner on payment of compounding amount. The provisions regarding compounding of offence should be brought to the notice of person being prosecuted and such person be given an offer of compounding.
• Where  a  case  is  considered  suitable  for  launching  prosecution  and  where adequate evidence is forthcoming, securing conviction largely depends on the quality of investigation.
• Senior should officers to take personal interest in the investigation of important cases of GST evasion and in respect of cases having money laundering angle and to provide guidance and support to the investigating officers.