Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram
Discussions Forum
Home Forum Goods and Services Tax - GST This

A Public Forum.
Acknowledging the Value of Experts.

Contribute Your Wisdom, Shape the Future.
Let Your Experience Guide Others

Submit new Issue / Query     My IssuesMy Replies
A free service.
You may submit an issue for brainstorming also.

PUNISHMENT UNDER SECTION 132, Goods and Services Tax - GST

Issue Id: - 119513
Dated: 14-1-2025
By:- Sadanand Bulbule

PUNISHMENT UNDER SECTION 132


  • Contents

Punishment for certain offences.

Section 132. (1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences, namely:-

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) 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 leading to wrongful availment or utilisation of input tax credit or refund of tax;

(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;

(d) xxxx

Query:

The word " benefits" is not defined under the GST Act. So does the word" benefits" used in the opening line of Section 132 mean the benefit of ITC or pecuniary benefit or any one of these two? This is crucial because, the person who "retains the benefits" arising out of listed offences is alone liable for punishment of imprisonment or fine or both subject to other conditions and threshold limit prescribed under Section 132 of the GST Act, if charges are proved in the court of law.

Experts to clarify.

Greetings to all the visitors on the eve of Makar Sankranthi festival.

Post Reply

Posts / Replies

Showing Replies 1 to 13 of 13 Records

Page: 1


1 Dated: 14-1-2025
By:- Sadanand Bulbule

The clarification sought is relevant in the light of following situation as well:

Section 122 (1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.


2 Dated: 15-1-2025
By:- Shilpi Jain

Is there any specific situation that you would want to check if it falls under the ambit of 'retains benefit'. That would make the query more objective to answer.


3 Dated: 15-1-2025
By:- Sadanand Bulbule

Madam

As already mentioned, Section 132 intends punishment only if twin conditions mentioned in its opening phrase are proved. Mere issue of tax invoices without  "retaining benefits" arising out of that is not liable for punishment. Assuming a person retains a financial benefit like commission or whatever like that for issuing tax invoices without underlying supply of goods, is such amount fits into the term " retains benefits" used in Section 132? Or else the benefit of ITC alone qualifies to be the retention of benefit for punishment under Section 132[1][i]?

Your comments.


4 Dated: 16-1-2025
By:- KASTURI SETHI

Sh.Sadanand Bulbule Ji,

Sir, In my view, most appropriate answer to your query is ""any one of these two"" The emphasis is laid on the word, 'any'. 'How it is most appropriate is explained below :-

(i) When any word or term has not been defined in GST Act, we are supposed to resort to either other relevant Acts or case laws in this context.

(ii) The word, 'benefit' denotes any form of advantage as per the judgement State of Gujarat Vs. Essar Oil Ltd. reported as 2012 (1) TMI 47 - SUPREME COURT (Para Nos. 62 and 63).

Source : Supreme Court Words & Phrases with Legal Maxims (Judicially Considered) Compiled by Surendra Malik and Sumit Malik. Publishers : Eastern Book Company, Lucknow (UP).

(iii) Here it is crucial to know the meaning of the word, ''commit' mentioned in Section 132 (1). Madras High Court in the case of Jayachandran Alloys Vs. The Superintendent of GST and Central Excise reported as 2019 (5) TMI 895 - MADRAS HIGH COURT has held that the word, 'commits' requires the acts leading to the offence to be established before punishment is imposed. Since the above judgment explains Section 132 of CGST Act, so the whole judgment is worth reading.

(iv) 'The word, 'benefit' (any form of advantage) implies the retention of any illegal benefit which may result from the offences committed by way of the supply of goods or services without any invoice or issuance of invoices/bill of supply without goods or services.


5 Dated: 16-1-2025
By:- Sadanand Bulbule

Dear Sirji

Thank you so much for an illustrated explanation coupled with relevant judicial rulings.🙏🙏


6 Dated: 16-1-2025
By:- KASTURI SETHI

Sh. Sadanand Bulbule Ji,

Sir, My reply is the result of joint venture because I save your queries as well as your replies posted in this forum and thus learn a lot from all aspects.

Do you require more case laws on the issue irrespective of the decision whether pro-revenue or anti-revenue ? You will have to work hard for this purpose.

I am of the view that we can extract benefit from pro-revenue case laws for the tax payers and Govt. can extract benefit from pro-tax payer case laws in the interest of revenue. What is crucial is the art of extracting benefit ? Am I right in this aspect ?


7 Dated: 16-1-2025
By:- Sadanand Bulbule

Dear Sirji

Literally, your reply has taken me to the goldmine.Your expression is perfect. And I am the beneficiary every time.


8 Dated: 20-1-2025
By:- Sadanand Bulbule

9 Dated: 20-1-2025
By:- Sadanand Bulbule

As already made clear, levy of penalty under Section 122 is subject to Explanation-1 [ii] which  reads as under:

(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 1[sections 122 and 125] are deemed to be concluded.

 


10 Dated: 20-1-2025
By:- Sadanand Bulbule

In my considered opinion, the “main person”  for the purpose of levy of penalty under Section 122 besides adjudication under Section 74 is the offender under Section 132(1)(c).

Further the offender under Section 132(1)(b) cannot be subjected to adjudication under Section 74 in the absence of jurisdictional facts. 


11 Dated: 27-1-2025
By:- Sadanand Bulbule

Dear all

The ratio of the following Hon'ble SC judgement on penalty under Section 122 [1-A] squarely applies to the opening phrase of Section 132 as far as "retention of benefits" is concerned. Further in the Hon'ble Bombay High Court judgement [ referred below], the concept of benefit is indicated as the "primary benefit of ITC' arising of the offences listed therein. 

Experts to comment.

2025 (1) TMI 1249 - SC ORDER - UNION OF INDIA & ORS. VERSUS SHANTANU SANJAY HUNDEKARI & ANR. ETC.


12 Dated: 30-1-2025
By:- Sadanand Bulbule

13 Dated: 30-1-2025
By:- Sadanand Bulbule

Dear all

I have reproduced my following article on Section 122/132. I hope this sinks with the finding of the Hon'ble Supreme Court and Madras High Court posted [supra]. This is a gentle reminder to all

Published on Tax Management India. Com website on 10/02/2022

PENALTY UNDER Section 122.

The GST Law is constantly evolving itself accommodating the needs of changing times by providing new provisions and deleting the redundant one. So also the business evolves and this practice will never stop. The on-going monitoring process by the Government in consultation with the stakeholders on regular basis sprouts insertion and deletion of provisions to the GST Law. The bottom-line of such consultation process is to safeguard the revenue and the honest business.

2. However no tax regime is perfect and it cannot be also. As the law gets evolved on the same pace, the anti-evasion elements will also evolve searching different modes to break the law. In any business, there are talented cheaters or master-minds to distress the revenue with all their strength. However such efforts are strong, initially they enjoy being successful. But at the end of the game, they get trapped under the octopus provisions of the GST Law. So the GST law is much wiser and wider, it does not forget, forgive such cheaters and finally dumps them in the live furnaces of the Act. The wheel of time will decide the right furnace for the wrong person to punish.

3. This is the universal footing for framing penal provisions under the GST Act, like any other economic statutes. In the financial administration, it is necessary to make a qualitative leap in the fight against tax evasion and to focus checks on high-risk taxpayers. So normally the authorities perform their duties with undaunting spirit to derive the best results. To achieve this, the authorities have to ensure that, the facts are like diamonds to reflect their inner infinity towards the safety of revenue and the honest taxpayers too. Therefore the GST Act has various penal provisions in its pool to deal with, particularly the fraudsters and the technical non-compliants in general.

4. Before moving to the provisions of Section 122, it is worth to note the judgement dated August 4, 1969 of the Hon‘ble Supreme Court has held in the case of HINDUSTAN STEEL LIMITED VERSUS STATE OF ORISSA [1969 (8) TMI 31 - SUPREME COURT] and other similar judgments, that the liability to pay penalty does not arise merely upon proof of default. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty shall not be ordinarily imposed unless the party acted deliberately in defiance of law or is found guilty of conduct, contumacious or dishonest or acted in conscious disregard of its obligation.

5. The GST Act has provided many penal provisions to punish the guilty. This has raised many questions as to when is the right time and who is the right authority to invoke the penal provisions of Section 122, whether before, during or after adjudication process? In this backdrop, here are my expressions.

6. Section 122 includes wide-ranging offences attracting different amount of penalty as fixed therein. Basically Section 122(1) (i) to (xxi) provides for levy of penalty on proven tax evasion events, false/forged tax invoices, wilful defaults, unlawful refunds and other such allied fraudulent activities. It also provides penalty under Section 122(2) & (3) for the activities which induce the offenders culminating in the anti-revenue activities.

7. Although such provisions have been commonly indicated under Section 122, the Inspecting Officer needs to check the sustainability of its jurisdiction thereunder to levy penalty at any time of its choice. It is gathered that inspecting authorities intimidate by issuing notices more particularly under Section 122(1) much before the adjudication under Section 73 or 74 of the Act.

8. Nevertheless the inspecting authority may levy penalty in respect of administrative and technical offences clearly classified under Section 122. Looking at the object of the Act, even if the inspecting authorities issue notices under Section 122(1) for tax evasion related offences, they do not get fructified in view of the deeming Explanation-ii appended to Section 74 and Section 75(13) which specifically restricts the levy of double penalty for the same offence. Since the proven tax evasion cases are liable for adjudication under Section 73 or 74, the principle of double jeopardy discreetly comes into place.

9. Couple of relevant provisions governing the penalties under the GST Act, 2017 are reproduced hereunder for ready reference.

Section 74.

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

(i) xxxxxxx.

(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.

Section 75 (13) 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.

10. Thus there is precise deeming provision under Section 73 and 74 and distinct prohibition imposed under Section 75(13) to invoke the specific provisions under Section 122 in the case of proven frauds, illegalities, irregularities and improprieties. So notice under Section 122(1) cannot be issued very casually, much less confirming it, as the penal provisions of the Act are categorized and the interconnected situations are also crystallised to invoke them by the right authority at the right time, depending upon its necessity, if any.

11. Under the GST Act, the Inspecting Officer may observe some discrepancies under a given set of circumstances. But in such observation, only observation exists but not conclusion. Observation differs from observer to observer based on its own “limited knowledge”. The limited knowledge of the observer, therefore, may be superfluous and may not be the reality to conclude the “superfluous comments” the way he/she wishes. Thus some one’s comment need not be the absolute fact to be acceptable by all like vibrant brightness of 12 noon Sun. So the appetite for judicious understanding of the facts and law is indispensable during inspection/investigation. Many a times in anger, one may attack mirror.

12. Article 265 of the Constitution reads as under: “No tax shall be levied or collected except by authority of law.” Underlining this principle, the intent of the law makers is to get the due amount of tax, penalty and interest under the Act via Section 73 or 74, by authority of law, as much peacefully as possible on real time basis and thereby keeping full stop for all likely litigations at once. Thus adjudication aims for win-win situation. As such there is no concept of double penal action for the same offence, once by way of penalty under Section 73 or 74 and again by way of penalty under Section 122. There may be some exceptional contingencies where penalty under Section 122 may be imposed, in case the adjudicatory proceedings under Section 73 or 74 are not plausible. Or the essential ingredients to invoke the jurisdiction under Section 73 or 74 are not established. It depends upon the facts and circumstances of each case, so it cannot be generalised.

13. Further from perusal of Section 75(4) of the Act, it is evident that opportunity of personal hearing has to be granted by authorities under the Act where either a request is received from the person chargeable with tax or penalty for opportunity of hearing or where any adverse decision is contemplated against such person. Thus, prima facie, it appears that where an adverse decision is contemplated against the person, such a person even need not request for opportunity of hearing and implicitly mandatory for the authority concerned to afford an opportunity of personal hearing before passing an order adverse to such person.

In any quasi-judicial proceedings, its sustainability is more important than success. Many a times, success is clueless. However sustainability is the ultimate result of strong foundational facts and it is the victory, irrespective of which side it leans. Sustainability of facts constantly travels in the final destination of law i.e., closer to justice.

16. High Court Ruling on Section 122.

The Hon’ble High Court of Karnataka in its judgement dated 17/02/2021 rendered in the case of TINTON RIVER PALMS, VERSUS STATE OF KARNATAKA, THE COMMISSIONER OF COMMERCIAL TAXES, THE ASST. COMMISSIONER OF COMMERCIAL TAXES (ENF) - 1, MANGALORE [2021 (3) TMI 1154 - KARNATAKA HIGH COURT] while deciding the petition challenging the notice issued under Section 122(1), has held as under:

“The status of the case to the enforcement authority is closed as soon as the report is submitted. The notice issued under Section 122(1) of the Act was merely to appraise the tax payer about the observations made and the liability arising thereof. No adjudication proceeding to create a legal demand is initiated, nor will be initiated”.

17.CONCLUSION.

It is undisputed that, determination of tax, penalty and interest essentially is under the authority of law and therefore, the adjudication under Section 73 & 74 of the GST Act shall be concluded first. Then the deemed conclusion of penal provisions under Section 122 as provided under Section 75(13) of the GST Act would ensue naturally. In other words, despite separate notices are issued under Section 122 of the Act, penalty cannot be levied much before the adjudication. On the other hand, once the adjudication is concluded invoking Section 73 or 74, it would attain the basics of “absolute composite order” culminating in the deemed conclusion of proceedings under Section 122 of the Act.

18. SUGGESTION:

A. Evidence is the natural & beautiful soul of taxation law and the Proper Officer to calibrate them with standardised modes is the “adjudicating authority”. Given the unique features of adjudication provisions, careful consideration must be given to ensuring such provisions are exercised with a baseline understanding the entirety of other governing provisions.

B. GST Law does not believe in blind, unsustainable and wishful assessments and consequently the law not in favour of unnecessary luxury litigation. Therefore the inspecting authorities, without intimidating to levy penalty under Section 122 are obliged to transfer transparent inputs on what the adjudicating authority need to focus while determining the correctness of such findings and to adjudicate judicially under Section 73 or 74 read with Section 75 which concurrently takes care of penal provisions under Section 122.This is the quantum shift from mundane assessment to facts-driven adjudication regime.

C. Further adjudication is the base to impose punishment with imprisonment and fine on prosecution under Section 132. However it is subject to compounding of offences under Section 138, either before or after the institution of prosecution. So let the sphere of transparent adjudication start rolling, which in turn will answer all the prospective questions.

By: Sadanand Bulbule - February 10, 2022

 


Page: 1

Post Reply

Quick Updates:Latest Updates