Chapter XIX of CGST Act, 2017 provides for offences and penalties. Section 122-125 of CGST Act, 2017 provides for penalty for certain offences. These sections cover varied offences for which penalty have been provided in the statute.
Presently, provision of Section 122 are being invoked alongwith Section 73/74 and since the time limit for issuing notice under Section 73/74 has not elapsed for the year 2017-18, therefore the question of time limit has not become relevant till now.
It would be pertinent to highlight that Section 122(1) of the CGST Act, 2017 provides for penalty for 21 offences and the question which arises is supposedly revenue finds that a taxable person has committed offence as provided under Section 122(1)(x) of the CGST Act, 2017 which provides for penalty for falsification of financial records. The brief question which the article intends to analyse is what is the time period for initiation and conclusion of proceedings under Section 122 of the CGST Act, 2017.
It is to be highlighted that the provisions of Section 73/74 are applicable only in limited cases of wherein tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised. There are instances of offences under 122 wherein penalty is leviable in cases other than those falling under Section 73/74. Therefore, it is not necessary that provision of Section 73/74 would always be invoked while invoking provisions of Section 122. Further, Rule 142(1) of the CGST Rules, 2017 mentions notice issued for Section 73/74 alongwith a separate mention of Section 122 of CGST Act, 2017. Therefore, on a holistic view it can be said that proceedings under Section 122 are separate than proceedings under Section 73/74 of CGST Act, 2017.
Rule 142(1) of the CGST Rules, 2017 provides that the proper officer shall serve, along with the notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01 specifying therein the details of the amount payable.
Further Rule 142(5) of the CGST Rules, 2017 provides that summary of the order issued under section 52 or section 62 or section 63 or section 64 or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax and Rule 142(6) provides that the order referred to in sub-rule (5) shall be treated as the notice for recovery.
That on bare reading it seems that the notice for initiating penalty under Section 122 has to be issued as per the process laid down under Rule 142(1) of the CGST Rules, 2017 and the order has to be passed under Section 122 read with Rule 142(5) of the CGST Rules, 2017.
For the sake of keeping the article to the limited aspect of the time limit for initiation of the penalty proceedings, lets assume that the provisions of Section 164 of CGST Act, 2017 empowers the government to make rules for procedure to be laid down for adjudication proceedings under section 122 of CGST Act, 2017.
However, the question still remains that Rule 142 does not provide for any time limit for the issuance of notice or passing of the order unlike Rule 117 which provides for time limit for furnishing of TRAN-1.
Another school of thought is that an indirect reference can be made from provisions of Section 36 which provides for time limit for retention of the records. The section provides that every registered person required to keep and maintain books of account or other records in accordance with the provisions of sub-section (1) of section 35 shall retain them until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. It further provides that a registered person, who is a party to an appeal or revision or any other proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or by the Commissioner, or is under investigation for an offence under Chapter XIX, shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceedings or investigation for a period of one year after final disposal of such appeal or revision or proceedings or investigation, or for the period specified above, whichever is later.
Can an indirect reference be made that since the records are to be maintained for a year for a maximum period of seventy-two months from the due date of furnishing of annual return for the relevant year, therefore the maximum time period within which any order can be passed will be seventy-two months from the due date of furnishing of annual return for the relevant year. A taxpayer may contend this but in the author’s opinion would be stretching the scope of the provision too far and clarity should be provided in the law.
The absence of the provision of time limit regarding initiation and conclusion of penalty proceedings time limit gains furthermore strength considering the amendments made under section 129 of CGST Act, 2017. Circular No. 41/15/2018-GST Dated 13th April 2018 in absence of any clear time limit for passing order under Section 129 provided that finalisation of the proceedings under section 129 of the CGST Act shall be taken up on priority by the officer concerned and the security provided may be adjusted against the demand arising from such proceedings. Further Finance Act, 2021 has now amended Section 129 to provide that the proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1). The amendment is yet to be made effective from a date to be notified but this itself reflects that there is a need to provide similar time limits under other provisions for the levy of penalty otherwise an open-ended future lies ahead for the tax payers.
There is a lack of clarity in terms of time limit for initiation and conclusion of proceedings under Section 122,123, 124 and 125 and the Statute it seems does not lay down the time period for initiation and conclusion of the proceedings.