Examine the implications as regards the bailability and quantum of punishment on prosecution, in respect of the following cases pertaining to the month of December under CGST Act, 2017-

(i) ‘X’ collects ₹245 lakh as tax from its clients and deposits ₹241 lakh with the Central Government It is found that he has falsified financial records and has not maintained proper records.

(ii)’Y’ collects ₹550 lakh as tax from its clients but deposits only ₹30 lakh with the Central Government.

What will be the implications with regard to punishment on prosecution of ‘X’ and ‘Y’ for the offences? What would be the position, if ‘X’ and ‘Y’ repeat the offences?

It may be assumed that offences are proved in the Court.

Solution:

(i)As per section 132(1)(d)(iii) of the CGST Act, 2017, failure to pay any amount collected as tax beyond 3 months from due date of payment is punishable with specified imprisonment and fine provided the amount of tax evaded exceeds at least ` 100 lakh. Therefore, failure to deposit ` 4 lakh collected as tax by ‘X’ will not be punishable with imprisonment.

Further, falsification of financial records by ‘X’ is punishable with imprisonment up to 6 months or with fine or both vide section 132(1)(f)(iv) of the CGST Act, 2017 assuming that falsification of records is with an intention to evade payment of tax due under the CGST Act, 2017and the said offence is bailable in terms of section 132(4) of the CGST Act, 2017.

(ii)    Failure to pay any amount collected as tax beyond 3 months from due date is punishable with imprisonment upto 5 years and with fine, if the amount of tax evaded exceeds ` 500 lakh in terms of section 132(1)(d)(i) of the CGST Act, 2017.

Since the amount of tax evaded by ‘Y’ exceeds ` 500 lakh (` 550 lakh –

` 30 lakh), ‘Y’ is liable to imprisonment upto 5 years and with fine. It has been assumed that amount of ` 520 lakh collected as tax is not paid to the Government beyond 3 months from the due date of payment of tax. Further, the imprisonment shall be of at least 6 months in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court vide section 132(3) of the CGST Act, 2017. Such offence is non-bailable in terms of section 132(5) of the CGST Act, 2017.

If ‘X ’and ‘Y’ repeat the offence, they shall be punishable for second and for every subsequent offence with imprisonment upto 5 years and with fine in terms of section 132(2) of the CGST Act, 2017. Such imprisonment shall also be of at least 6 months in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court.