LEGAL RETRIBUTION / PUNISHMENT ON THE TAX CONSULTANTS IN GST LAWS FOR THE OFFENCES UNDER SECTION 132 OF CGST ACT

[Anuj Bansal]

Everyone knows after introduction of GST Laws that is since July 2017, every GST consultant is putting lots of efforts in doing compliances and also in keeping the track on legal updates which are so frequent that a legal opinion made on certain day may become redundant after next couple of days. Therefore, all kinds of pressure are there on the consultants to justify their job. Even at certain seminars / conferences jokes are cracked that after introduction of GST, GST consultants are not getting match for marriage. Girls are avoiding GST Consultant for marriage, as most of the time he would be sitting before computer system for filing returns. Despite of all such kind of efforts by consultants, disheartening is that sword of domicile is always hanging on his head and consultant is always under immense pressure that when sword will fall on him.

Now, you would be wondering why such kind of statement has been made for the consultant?  On looking at recent news in newspaper / journal, it provoked me to write this article. I start with quoting following news headlines wherein, consultants were arrested for the defaults being made:

• Tax consultant facing probe in ₹ 20 crore GST evasion case commits suicide. (INDIA Today, 11 July, 2019)
• Four held for issuing GST invoices worth ₹2,364 Cr. without supplying goods (Business line, 3 June, 2019)
• Sujana group tax consultant arrested in Hyderabad. (Times of India,04 May, 2019)
• Chartered accountant arrested for GST fraud. (Times of India, 21 Feburary,2019)
• CGST Thane arrests Chartered Accountant and two traders for GST Evasion (Press release by office of the Commissioner of Central GST, THANE)

Reading above news headlines would have mortified everyone, being a GST consultant. Law of the land shall decide how veracious these allegations are but one thing is for sure; GST consultants have to be very vigilant and mindful in advising client so that they are not trapped in hands of Law. There is no escape to legal punishment and prosecution if any consultant contravenes provisions of GST law. But it may happen that a consultant is not aware and involved in sin of his client but still he shall be liable due to provisions of GST Laws, as it is said, ‘When bull fights, crops suffer.’

Consultants should be fully aware of their responsibilities in light of provision of GST Laws so that they are not held for intended or unintended misconducts of the clients. In this article, provisions of GST Law have been discussed under which a consultant can be held guilty and punishable for contravening provisions of law.

Chapter XIX of CGST Act contains provisions relating to OFFENCES AND PENALTIES. Specifically, this article deals with offences and provisions resulting in arrest of the person who has committed offence.

POWER TO ARREST FOR OFFENCES UNDER SECTION 132

As per Section 69 of CGST Act, where there is reason to believe, the Commissioner is empowered to order any officer to arrest such person who has committed any of the offences mentioned under Section 132 of CGST Act.

NATURE OF OFFFENCES for which a person can Be arrested (Section 132 of CGST Act)

A detailed study of Section 132 would help to understand the nature of offences for which a person may be arrested. Section 132(1) of CGST Act specifies; ‘Whoever commits any of the following offences, namely: -

1. Supplies any goods or services or both without issue of any invoice with the intention to evade tax.
2. Issue any invoice or bill without supply of goods or services or both.
3. Avails input tax credit using such invoice or bill referred to above.
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
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;
9. 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 supplies false information; or
12. Attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) above.

On analysing nature of offences mentioned above, one can say that if assessee commits such offences, how a consultant can be arrested for the same? In regard to same, reference can be made to clause ’L’ above wherein it is mentioned that in case any person attempts to commit, or abets the commission of any of the offence, such person can also be arrested. Accordingly, it can be alleged by the department that the consultant is involved and abets in the commission of the offence. Therefore, it is very important to understand the meaning of word ‘abet’. Its meaning can be derived from different dictionaries: -

• Cambridge dictionary: ‘to help or encourage a person or thing to do something, esp. something wrong or illegal’.
• Oxford dictionaries: ‘Encourage or assist (someone) to do something wrong, in particular to commit a crime’.
• Collins English dictionary: ‘if one person abets another, they help or encourage them to do something criminal or wrong. Abet is often used in the legal expression ‘aid and abet.

On summing up above meanings, ‘abet’ means helping or   encouraging someone to do something wrong or criminal. If an assessee commits any offence with the intention of evading tax, he shall be guilty. Further, if it is found that assessee’s consultant has supported him in committing the offence like furnishing details to the department despite knowing that details are false then he may also be guilty of conducting offence under clause ‘L’ of Section 132(1).

Further we may also state that a consultant may also be held guilty under clause ‘l’, in case client refer his name during any of the proceeding against him. Such statement of client may be considered by the department as reason to invoke the provision of arrest against the consultant.

PUNISHMENT FOR OFFENCES UNDER SECTION 132

Section 132 (1) also enumerates punishments for the above-mentioned offences: -

Section	Situation	Quantum	Punishment
132(1)(i)	Amount of tax evaded, input tax credit taken wrongly availed or utilised or amount of refund wrongly taken	Greater than 5 crores	Imprisonment up-to 5 years and with fine
132(1)(ii)		Greater than 2 crores but less than 5 crores	Imprisonment up-to 3 years and with fine
132(1)(iii)		Greater than 1 crore but less than 2 crores	Imprisonment up-to 1 years and with fine
132(1)(iv)	Where a person commits or abets offence as per point f,g,h above		Imprisonment up-to six months or with fine or with both

Where any person convicted of an offence under Section 132, is again convicted of an 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 five years and with fine.

A person shall not be prosecuted for any offence except with the previous sanction of the Commissioner. However, the offences against consultants are non-cognizable and bailable. Accordingly, a bail has to be granted to the consultant on the spot.

SAFEGAURDS & PRECAUTIONS CONSULTANTS MUST TAKE

In the light of above discussions, it is stated that a consultant must take certain precautions while dealing with the clients specifically while finalising or submitting the details to the department. Accordingly, following points shall be taken care of while dealing with client: -

1. Consultant should be in possession of signed engagement letter. Scope of work should be clearly stated in engagement letter and it shall specifically mention that ownership / responsibility of the details / documents would be of clients.
2. If a consultant is appointed as auditor as specified in Section 35(5) of CGST Act, utmost precaution should be taken in conducting such audit. Documentation of papers should be done properly.
3. On detection of any illegal action, as given in Section 132, of the assessee, consultant should immediately inform the client to rectify the same or leave the assignment after informing in writing to the client.
4. All the returns / documents must be signed / submitted to the department after using digital signature by the client himself.
5. Details / documents must be prepared on the basis of evidences produced by the client and supporting documents shall always be maintained in the records.