The provisions relating to offences and penalties are contained in section 122 to 138 of the Central Goods and Services Tax Act, 2017. The said provisions in brief are as under:

Sec. 122(1) provides for the amount of penalty for offences specified under this sub-section at ₹ 10,000 or equal to the amount of tax evaded or tax not deducted u/s 51 or short deducted or deducted but not paid to the Government. It also refers to tax not collected u/s 52 or short collected or collected but not paid to the Government, ITC availed of or passed on or distributed (by ISD) irregularly and refund claimed fraudulently. It provides for an amount whichever is higher.

Offences for which the above penalty shall be levied are as follows:

1. 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;
2. 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;
3. Failure to pay to the Government any amount collected as tax beyond a period of three months from the due date of such payment;
4. 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;
5. 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.
6. 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.
7. 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;
8. Fraudulently obtaining a refund of tax under the Act;
9. Availing or distributing ITC in contravention of provisions relating to manner of distribution of credit by ISD;
10. Falsifying or substituting financial records or production of fake accounts or documents or furnishing any false information or return with an intention to evadepayment of tax due;
11. Failure to obtain registration under the Act though liable.
12. Furnishing of any false information with regard to registration particulars, either at the time of applying for registration or subsequently.
13. Obstructing or preventing any officer in discharge of his duties;
14. Transporting taxable goods without the cover of specified documents;
15. Suppressing turnover leading to evasion of tax;
16. Failure to keep, maintain or retain books of account and other documents in accordance with the provisions of the Act or rules made thereunder;
17. Failure to furnish information or documents called for by an officer, or furnishing false information or documents during any proceedings;
18. Supply, transportation or storage of any goods by a taxable person, which he has reason to believe are liable for confiscation;
19. Issue of any invoice or document by using the registration number of another registered person;
20. Tampering with, or destruction of any material evidence or document;
21. Disposing off or tampering with any goods which have been detained, seized, or attached under the Act.

Sec. 122(2) refers to offences relating to supply of any goods or services or both on which tax has not been paid or short-paid or erroneously refunded, or where ITC has been wrongly availed or utilised by a registered person. They are classified as under :-

Sec. 122(3) refers to offences liable to penalty up to ₹ 25,000. Those are:

1. Aiding or abetting any of the offences specified above;
2. Acquiring possession of goods which are liable for confiscation while transporting, etc.;
3. Receiving any supply of services which a person has reasons to believe are in contravention of any provisions;
4. Failure to appear before the officer in response to a summon for appearance;
5. Failure to issue or account for an invoice in accordance with provisions of the Act.

Sec. 123 refers to failure to furnish information u/s 150 which is punishable with penalty of ₹ 100 per day during which the default continues, subject to maximum ₹ 5,000.

Sec. 124 provides for a fine for failure to furnish statistics u/s. 151 or wilfully furnishing false statistics which may extend to ₹ 10,000 and in case of a continuing offence with a further fine which may extend to ₹ 100 per day during which the offence continues, subject to maximum of ₹ 25,000.

Sec. 125 refers to levy of penalty in general. Any contravention for which penalty is not separately provided in the Act, is punishable with a penalty which may extend to ₹ 25,000.

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

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. 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. No penalty to be imposed on a person without giving him an opportunity of being heard. While passing an order of penalty, the concerned officer must specify the nature of the breach, the applicable law, regulation or procedure. 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.

Above provisions shall not apply where the penalty specified is either a fixed sum or expressed as a fixed percentage.

Sec. 129 refers to detention, seizure and release of goods and conveyances (vehicles) while in transit. It says:

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:

The goods and conveyances so seized shall be released on a provisional basis upon execution of a bond for the value of the goods in FORM GST INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, cess, interest and penalty. 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.

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. 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.

A plethora of Writ Petitions have been filed in various High Courts against unlawful seizure of goods by the Department or expeditious release of the seized goods. A gist of few of the notable orders has been produced hereunder:

• Detention of goods merely for infraction of the procedural rules is without jurisdiction as the movement of goods from warehouse of the Petitioner-Assessee shall not qualify as supply and accordingly, was not liable to tax and any procedural lapse with GST Rules does not amount to taxable supply and, cannot result in detention of goods.

Indus Towers Ltd. vs. Asst. State Tax Officer [2018] 53 GSTR 103 (Ker.)

• Detention of goods not sustainable when goods transported for job work are not accompanied by an e-way bill in as much as the authenticity of the delivery challan is not suspected.

AGE Industries P. Ltd. vs. Asst. State Tax Officer [2018] 53 GSTR 113 (Ker.)

• A Writ Petition filed against the insistence of the Revenue to pay the security deposit demanded in the detention notice as a condition for release of goods and vehicle. The Kerala High Court directed that the Department shall release the goods upon furnishing of bank guarantee by the assessee for the amount demanded.

Mariyam Steel vs. State Tax Officer (Intelligence Inspector) [2018] (3) TMI 969 (Ker.)

• Penalty and seizure is not sustainable for movement of goods without Transit Declaration Form (TDF) prescribed under Rule 138 of the UPGST Rules, 2017 unless there exists 
  mala fideintention to evade taxes.

Ramdev Trading Co. vs. State of U.P. [2018] 48 GSTR 31 (All)

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.

Sec. 130(2) provides that the concerned officer will 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. Aggregate of penalty and fine shall not to be less than the amount of penalty leviable u/s. 129(1).

The owner of a hired conveyance shall be given an option to pay a fine equal to the tax payable in lieu of confiscation. Fine in lieu of confiscation shall be in addition to any tax, penalty or charges payable in respect of such goods or conveyance. No order for confiscation or imposition of penalty shall be issued without an opportunity of hearing. Title of the confiscated goods or conveyance shall vest in the Government. 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.

Sec. 132 provides punishment for the following offences:

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.

It may be noted that the punishment prescribed varies as per the amount of tax evaded or ITC wrongly availed up to five years imprisonment and fine.

All offences are non-cognisable and bailable. Except the following Offences which are cognisable 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.

Sec. 134 provides that the grant of previous sanction by the Commissioner is a must for taking cognisance 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.

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.

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.

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.

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.