Section 122 of the CGST Act, 2017:

Extract of Section 122 of the CGST Act, 2017

Section 122 of the Central Goods and Services Tax (CGST) Act 2017 outlines the penalties for various GST-related offences. It is of utmost importance for taxpayers, especially those registered under the CGST Act, to understand these provisions. They list actions that constitute violations and the penalties imposed on offenders, thereby ensuring compliance with GST laws.

Section 122: Penalty for Certain Offences

(1) Where a taxable person who—

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

(ii) 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;

(iii) avails input tax credit using such invoice or bill referred to in clause (ii);

(iv) 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;

(v) fails to deduct the tax by the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax;

(vi) fails to collect tax by the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section, or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section 52;

(vii) takes or utilises input tax credit without actual receipt of goods or services or both, either fully or partially, in violation of the provisions of this Act or the rules made thereunder;

(viii) fraudulently obtains refund of tax under this Act;

(ix) takes or distributes input tax credit in contravention of section 20 or the rules made thereunder;

(x) falsifies or substitutes financial records, produces fake accounts or documents, or furnishes any false information to evade payment of tax due under this Act;

(xi) is liable to be registered under this Act but fails to obtain registration;

(xii) furnishes any false information about registration particulars, either at the time of applying for registration or subsequently;

(xiii) obstructs or prevents any officer in the discharge of his duties under this Act;

(xiv) transports any taxable goods without the cover of documents as may be specified on this behalf;

(xv) suppresses his turnover, leading to evasion of tax under this Act;

(xvi) fails to keep, maintain or retain books of account and other documents by the provisions of this Act or the rules made thereunder;

(xvii) fails to furnish information or documents called for by an officer by the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act;

(xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act;

(xix) issues any invoice or document by using the registration number of another registered person;

(xx) tampers with or destroys any material evidence or documents;

(xxi) disposes of or tampers with any goods that have been detained, seized, or attached under this Act,

shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed or refund claimed fraudulently, whichever is higher.

(2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised—

(a) for any reason other than fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. Of the tax due from such person, whichever is higher;

(b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to the tax evaded or tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed or refund claimed fraudulently, whichever is higher.

Legal Recourse and Proceedings

Legal Recourse

When a taxpayer is found in violation of Section 122, they should:

1. Review the Notice: Carefully read the notice detailing the alleged violation and the proposed penalty.
2. Prepare a Response: Gather relevant documents and evidence to refute or mitigate the alleged violation.
3. Submit a Response: File a response within the specified time frame, typically within 30 days from the date of receipt of the notice.

Legal Proceedings

If the taxpayer fails to respond adequately or if the response is not satisfactory, the GST authorities may proceed with the following:

• Adjudication: The proper officer will adjudicate the case based on the evidence presented and issue a final order.
• Recovery Actions: If the penalty is confirmed, recovery proceedings may be initiated to collect the outstanding amount.

Penalties and Prosecution

Penalties for non-compliance with Section 122 can include:

• Monetary Penalty: Penalties as specified in Section 122, which could be up to 100% of the tax evaded or Rs. 10,000, whichever is higher.
• Interest: Interest on the unpaid tax as per Section 50 of the CGST Act.
• Prosecution: In severe cases involving fraud or willful misstatement, prosecution under GST laws may be initiated, leading to severe penalties and imprisonment. Examples of such severe cases could include large-scale tax evasion, deliberate falsification of records, or repeated non-compliance despite warnings.

Conclusion

Section 122 of the CGST Act 2017 provides the framework for penalties for various offences under GST. Understanding the provisions of this section and how to respond to notices issued under it is crucial for ensuring compliance and avoiding severe legal consequences. By following the dos and don’ts and knowing the legal remedies available, taxpayers can navigate the process smoothly and address any issues effectively. Proper preparation and professional guidance are essential to handling such situations and ensuring compliance with GST regulations.