Guidelines for launching of Prosecution under the Central Goods & Services Tax Act, 2017
Finance Ministry has issued Instruction No. 04/2022-23 (GST-Investigation) dated 1st September 2022 issuing Guidelines for launching of Prosecution under the Central Goods & Services Tax Act 2017
Prosecution is the institution or commencement of legal proceeding; the process of exhibiting formal charges against the offender.
Section 132 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) codifies the offences under the Act which warrant institution of criminal proceedings and prosecution. Whoever commits any of the offences specified under sub-section (1} and sub-section (2) of section 132 of the CGST Act, 2017, can be prosecuted.
Guidelines for launching of Prosecution under GST Act
Sanction of prosecution:
The Instruction emphasizes the adequacy of evidence collection before launching the prosecution. The standard of proof required in a criminal prosecution is higher than adjudication proceeding as the case has to be established beyond reasonable doubt. Decision should be taken on case-to case basis considering various factors, such as, nature and gravity of offence, quantum of tax evaded, or ITC wrongly availed, or refund wrongly taken and the nature as well as quality of evidence collected.
The evidence collected should be adequate to establish beyond reasonable doubt that the person had guilty mind, knowledge of the offence, or had fraudulent intention or in any manner possessed mens-rea for committing the offence.
It has been particularly emphasized that in the case of public limited companies, prosecution should not be launched indiscriminately against all the Directors of the company but should be restricted to only persons who oversaw day-to-day operations of the company and have taken active part in committing the tax evasion etc. or had connived at it.
The Instruction states that decision on prosecution should normally be taken immediately on completion of the adjudication proceedings, except in cases of arrest where prosecution should be filed as early as possible. The Instruction also gives highlights of relevant observations of Hon’ble Supreme Court of India in this regard.
Monetary Limit:
According to the Instruction, prosecution should normally be launched where amount of tax evasion, or misuse of ITC, or fraudulently obtained refund in relation to offences specified under sub-section (1) of section 132 of the CGST Act, 2017 is more than Five crores. However, in following cases, the said monetary limit shall not be applicable in case of habitual offender and arrest cases.
Authority to sanction prosecution
The prosecution complaint for prosecuting a person should be filed only after obtaining the sanction of the Pr. Commissioner/Commissioner of CGST in terms of sub-section (6) of section 132 of CGST Act, 2017. In respect of cases investigated by DGGI, the prosecution complaint for prosecuting a person should be filed only after obtaining the sanction of Pr. Additional Director General/Additional Director General, Directorate General of GST Intelligence (DGGI) of the concerned zonal unit/ Hqrs.
Procedure for sanction of prosecution:
The Instruction gives the detail procedure for sanction of prosecution in case of arrest u/s 69 of CGST Act 2017 or in case of filing of prosecution. against legal person, including natural person. Importantly, Commissioner/Commissioner or Pr. Additional Director General/ Additional Director General of DGGI may on his own motion also, taking into consideration inter alia, the seriousness of the offence, examine whether the case is fit for sanction of prosecution irrespective of whether the adjudicating authority has recommended prosecution or not.
Appeal or withdrawal
The power to give approval for an appeal lies with Pr. Commissioner/ Commissioner or DG or Pr. DG (for cases booked by HQ Uni’t). Further, the Instruction gives procedure for withdrawal of complaint filed/ sanction-order of prosecution.
The Instruction also gives general guidelines including keeping of relevant records/documents. Filing prosecution need not be· kept in abeyance on the ground that the taxpayer has gone in appeal/ revision. In deserving cases, the name of persons convicted should be published as empowered under section 159.
Compounding of offence:
Section 138 of the CGST Act, 2017 provides for compounding of offences by the Commissioner/ Commissioner on payment of compounding amount. The provisions regarding compounding of offence should be brought to the notice of person being prosecuted and such person be given an offer of compounding by Pr. Commissioner/Commissioner or Pr. Additional Director General/ Additional Director General of DGGI, as the case may be.
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