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Offences and Penalties
Sr. No. Section No. Nature of Offences Quantum of Penalty
1. 122(1) Penalty For Certain Cases Applies To Taxable Person
i) Supply of goods or services or both without issue of any invoice or issue of an incorrect or false invoice with regard to any such supply; ₹ 10,000 or Amount of tax evaded whichever is higher.
ii) Issue of any invoice or bill without supply of goods or services or both in violation of provisions of this Act or rules made thereunder ₹ 10,000 or Amount of tax evaded whichever is higher.
iii) Failure to pay to the Government any amount collected as tax beyond a period of three months from the due date of such payment; ₹ 10,000 or Amount of tax collected but not paid to the Government, whichever is higher.
iv) Collection of any amount of tax in contravention of the provisions of the Act and failure to pay the same to the Government within three months from the due date for such payment; ₹ 10,000 or Amount of tax so collected and not paid, whichever is higher.
v) Failure to deduct tax at source or short deduction of tax at source or failure to pay to the Government, the amount deducted as tax; ₹ 10,000 or Amount of tax required to be deducted or short deducted or not paid, whichever is higher.
vi) Failure to collect tax at source or short collection of tax at source or failure to pay to the Government, the amount collected as tax; ₹ 10,000 or Amount of required to be collected tax or short collected or not paid, whichever is higher.
vii) Availing or utilising ITC without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of the Act or rules made thereunder; ₹ 10,000 or Amount of ITC availed or wrongly utilised, whichever is higher.
viii) Fraudulently obtaining a refund of tax under the Act; ₹ 10,000 or Amount of refund of tax so obtained, whichever is higher.
ix) Availing or distributing ITC in contravention of provisions relating to manner of distribution of credit by ISD; ₹ 10,000 or Amount of ITC so availed or distributed, whichever is higher.
x) Falsifying or substituting financial records or production of fake accounts or documents or furnishing any false information or return with an intention to evade payment of tax due; ₹ 10,000 or Amount of tax evaded whichever is higher.
xi) Failure to obtain registration under the Act though liable. ₹ 10,000 or Amount of tax evaded whichever is higher.
xii) Furnishing of any false information with regard to registration particulars, either at the time of applying for registration or subsequently. ₹ 10,000 or Amount of tax evaded whichever is higher.
xiii) Obstructing or preventing any officer in discharge of his duties; ₹ 10,000 or Amount of tax evaded whichever is higher.
xiv) Transporting taxable goods without the cover of specified documents; ₹ 10,000 or Amount of tax evaded whichever is higher.
xv) Suppressing turnover leading to evasion of tax; ₹ 10,000 or Amount of tax evaded whichever is higher.
xvi) Failure to keep, maintain or retain books of account and other documents in accordance with the provisions of the Act or rules made thereunder; ₹ 10,000 or Amount of tax evaded whichever is higher.
xvii) Failure to furnish information or documents called for by an officer, or furnishing false information or documents during any proceedings; ₹ 10,000 or Amount of tax evaded whichever is higher.
xviii) Supply, transportation or storage of any goods by a taxable person, which he has reason to believe are liable for confiscation; ₹ 10,000 or Amount of tax evaded whichever is higher.
xix) Issue of any invoice or document by using the registration number of another registered person; ₹ 10,000 or Amount of tax evaded whichever is higher.
xx) Tampering with, or destruction of any material evidence or document; ₹ 10,000 or Amount of tax evaded whichever is higher.
xxi) Disposing of or tampering with any goods which have been detained, seized, or attached under the Act. ₹ 10,000 or Amount of Tax evaded whichever is higher.
2. 122(2) Any registered person who :- Not due to fraud or any wilful mis-statement or suppression of facts to evade tax, ₹ 10,000 or 10% of tax whichever is higher.

Due to fraud or any wilful mis-statement or suppression of facts with a view to evade tax,
₹ 10,000 or 100% of tax whichever is higher.
i) Supplies of any goods or services or both on which tax has not been paid or
ii) short-paid or
iii) erroneously refunded,
iv) or where ITC has been wrongly availed or utilised.
3. 122(3) Any Person who;-
a) Aids or abets any of the offences (i) to (xxi) specified in section 122(1)above; May Extend to
₹ 25,000.
b) 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 reason to believe are liable for confiscation under the Act or rules made thereunder, May Extend to
₹ 25,000.
c) 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 rules; May Extend to
₹ 25,000.
d) Fails to appear before the officer in response to a summon for appearance to give evidence or produce a document in an inquiry; May Extend to
₹ 25,000.
e) Failure to issue invoice in accordance with the provisions of this Act or the rule made there under or fails to account for an invoice in his books of account. May Extend to
₹ 25,000.
4 123 If a person Fails to Furnish Information Return u/s. 150 within the period specified in notice issued u/s. 150(3). ₹ 100 per day of delay subject to maximum
₹ 5,000.
5. 124 Fine For Failure to Statistics By Any Person Require to Furnish Any Information or Return u/s. 151,
a) Without reasonable cause fails to furnish such information or return, as the case may be Fine May extend to
₹ 10,000 and in case of continuing offence
b) Wilfully furnishes or cause to furnish any information or return which he knows to be false. fine may further extend to ₹ 100 for each day after the first day during which the offence continues subject to maximum limit of ₹ 25,000.
6 125 General Penalty
Any Person who contravenes
Any of the provisions of this Act or rules for which no penalty is separately provided in the Act. May Extend to
₹ 25,000.

Note:

1. Sec. 126 refers to disciplines to be followed before levy of penalty, which are as under:

  1. No penalty to be levied for minor breaches of tax regulations or procedural requirements or any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence. A breach shall be considered a ‘minor breach’ if the tax amount involved is less than ₹ 5,000. Omission or mistake in documentation shall be considered to be ‘easily rectifiable’ if the same is an error apparent on the face of the record.
  2. Imposition of penalty will depend on the facts and circumstances of each case and should be commensurate with the degree and severity of the breach.
  3. No penalty to be imposed on a person without giving him an opportunity of being heard.
  4. While passing an order of penalty, the concerned officer must specify the nature of the breach, the applicable law, regulation or procedure.
  5. Voluntary disclosure of breach by a person prior to the discovery of the same by the officer has to be considered as a mitigating factor when quantifying penalty.
  6. Above provisions shall not apply where the penalty specified is either a fixed sum or expressed as a fixed percentage.

2. U/s. 127 where the proper officer is of the view that a person is liable for any penalty and the same is not covered by any proceedings
u/ss. 62, 63, 64 or 73 of the Act then he may issue an order for penalty after giving opportunity of hearing.

3. Section 128 provides that the Government by notification on the recommendation of Council may waive in full or part penalty or fee or both for such class of taxpayers and under such mitigating circumstances as may be specified therein.

Detention or Seizure/ Release of Goods and Conveyances While in Transit – Sec. 129.

  1. Transporting or storing any goods while they are in transit in contravention of the provisions will entail detention and seizure of all such goods and conveyances used for transporting such goods and documents relating to such goods subject to the terms of release as under :-
Taxable goods Exempt goods
Where the owner of goods comes forward to pay tax and penalty On payment of applicable tax and penalty equal to 100% of tax or on furnishing of security in the prescribed manner equivalent to the amount payable. On payment of an amount equal to 2% of value of such goods or ₹ 25,000, whichever is less or on furnishing of security equivalent to the amount payable.
Where the owner of goods does not come forward to pay tax and penalty On payment of applicable tax and penalty equal to 50% of the value of the goods reduced by the amount of tax paid thereon or on furnishing of security equivalent to the amount payable. On payment of an amount equal to 5% of value of such goods or ₹ 25,000, whichever is less or on furnishing of security equivalent to the amount payable.
  1. The goods and conveyances so seized shall be released on a provisional basis upon execution of a bond and furnishing of a security in such manner and of such quantum as may be prescribed or on payment of applicable tax and penalty payable.
  2. The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty after giving the concerned person an opportunity of being heard.
  3. Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty within seven days of such detention or seizure, further proceedings of confiscation u/s. 130 shall be initiated.
  4. Where the detained or seized goods are perishable or hazardous in nature or likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer.
  5. Sec. 130(1) refers to confiscation of goods or conveyances (vehicles) and levy of penalty.

    It provides that if a person supplies or receives any goods in contravention of the provisions of the Act or the rules, with an intent to evade payment of tax; or does not account for any goods which are liable to tax or supplies taxable goods without applying for registration or contravenes any of the provisions of the Act or the rules, with an intent to evade tax or uses of any conveyance to transport goods then all such goods and conveyances will be liable to confiscation unless the owner or his agent proves his lack of knowledge or connivance.

  6. Sec. 130(2) provides that the concerned officer shall give an option to pay fine in lieu of confiscation. The amount of fine shall not to exceed the market value of the confiscated goods, less the tax chargeable thereon. The Aggregate of penalty and fine shall not to be less than the amount of penalty leviable u/s. 129(1).
  7. The owner of a hired conveyance shall be given an option to pay a fine equal to the tax payable in lieu of confiscation of the conveyance. Fine in lieu of confiscation shall be in addition to any tax, penalty or charges payable in respect of such goods or conveyance.
  8. No order for confiscation or imposition of penalty shall be issued without an opportunity of hearing.
  9. Title of the confiscated goods or conveyance shall vest in the Government.
  10. If fine is not paid within three months, the proper officer shall dispose of such goods or conveyance and deposit the sale proceeds into Government treasury.

Punishment – Sec. 132

  1. Section 132 of the Act provides for punishment for certain offences upon whoever commits any of the following offences namely;-
    1. Supply of goods or services or both without issue of any invoice with an intention to evade tax;
    2. Issue of invoice or bill without supply of goods or services or both leading to wrongful availment or utilisation of ITC or refund of tax;
    3. Availment of ITC using such invoice or bill referred to in clause (b);
    4. Failure to pay tax collected to the Government within three months of the due date;
    5. Evasion of tax, fraudulent availment of ITC or fraudulently obtaining refund, where such offence is not covered under clauses (a) to (d);
    6. Falsifying or substituting financial records or producing fake accounts or documents or furnishing any false information with an intention to evade payment of tax;
    7. Obstructing or preventing any officer in the discharge of his duties;
    8. Possession of any goods liable to confiscation when transporting, etc.
    9. Receiving any supply of services which a person has reasons to believe are in contravention of any provisions;
    10. Tampering with or destruction of any material evidence or documents;
    11. Failure to supply any information required under the Act or knowingly supplying false information;
    12. Attempting to commit, or abetting the commission of any of the offences mentioned in clauses above.
  2. The punishment prescribed varies as per the amount of tax evaded or ITC wrongly availed up to five years imprisonment and fine.
  3. All offences are non-cognizable and bailable. Except the following Offences which are cognizable and non-bailable:-
    1. Supply of goods or services or both without issue of any invoice with the intention to evade tax;
    2. Issue of invoice or bill without supply of goods or services or both leading to wrongful availment or utilisation of ITC or refund of tax;
    3. Availment of ITC using such invoice or bill referred to in clause (b);
    4. Failure to pay tax collected to the Government within three months of the due date where the amount involved exceeds ₹ 500 lakh.
  4. A person shall not be prosecuted for any offence without prior approval of Commissioner.
  5. Sec. 134 provides that the grant of previous sanction by the Commissioner is a must for taking cognizance of any offence. No court inferior to that of a Magistrate of the First Class shall try any offence unless there is previous sanction granted by the Commissioner.
  6. Sec. 135 provides for presumption of existence of culpable mental state in any prosecution for an offence requiring such culpable mental state. Onus of proof is on the accused to prove otherwise.“Culpable mental state” includes intention, motive and knowledge.
  7. Sec. 136 refers to relevancy of statements under certain circumstances. A statement made and signed by a person on appearance in response to any summons issued u/s. 70 during the course of any inquiry or proceedings shall be relevant for proving the truth of the facts in any prosecution for an offence, when the person making the statement is dead or untraceable or is incapable of giving evidence or is kept out of the way by the adverse party or whose presence cannot be obtained without an amount of delay or expense which the court considers unreasonable. Further, when the person who made the statement is examined as a witness in the case before the court and the court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of the justice then the statement made during the inquiry shall be relevant for the purpose of proving in any prosecution proceedings.
  8. Sec. 137 refers to offences by companies. It says -
    • Where an offence committed by a person under this Act is a company, every person who, at the time the offence was in charge of, and was responsible for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
    • Where it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such person shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
    • In the case of a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
    • Lack of knowledge of the offence or exercising due diligence to prevent the commission thereof shall be a valid defence for any such person.
    • For the purposes of this section, company means a body corporate and includes a firm or other association of individuals.
  9. Sec. 138 provides for compounding of offences. The Commissioner is empowered to compound any offence committed either before or after the institution of prosecution subject to the payment of amount as may be prescribed. However, compounding of offence is not permitted by certain persons in certain circumstances specified in the section. On payment of compounding amount as may be determined by the Commissioner, no further proceedings in respect of the same offence shall be initiated and criminal proceedings, if already initiated, shall stand abated.
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