COMPOUNDING OF OFFENCES UNDER ‘CGST’ ACT, 2017

Compoundable offence

Compoundable offences are those offences where, the complainant (one who has filed the case, i.e. the victim), enter into a compromise, and agrees to have the charges dropped against the accused.   It consisted of a prosecutor or victim of an offence accepting anything of value under an agreement not to prosecute, or to hamper the prosecution of, a felony. To 'compound', in this context, means to come to a settlement or agreement. . Under the common law, compounding a felony was punishable as a misdemeanor.  It is a short cut method to avoid litigation.  In case of compounding, the accused need not appear personally and can be discharged on payment of composition fee which cannot be more than the maximum fine leviable under the relevant provision.  All tax laws, company laws are having the provisions for compounding of offence.  The GST is having no exception to this.  The GST  Act also contains the provisions for compounding of offences and the rules made there under prescribe the procedure of compounding.

Provisions under GST Act

Section 139 of the Act provides for compounding of offences.  Section 138(1) provides that an offence under this Act may, either before or after institution of prosecution be compounded by the Commissioner on payment, by the person accused of the offence to the Central Government or the State Government, as the case may be, of such compounding amount in such manner as prescribed.

The proviso to this section gives a list for which this provision does not apply-

• a person who has been allowed to compound once in respect of any of the offences specified in clauses (a) to (f) to Section 132(1) and the offences specified in clause (l) which are relatable to offences specified in clauses (a) to (f) of the said sub-section.The offences under section 132(1) (a) to (f) are detailed as below-

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made there under, with the intention to evade tax;

(b) 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 there under leading to wrongful availment or utilization of input tax credit or refund of tax;

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

(d) 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;

(e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);

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

• a person who has been allowed to compound once in respect of any offence, other than those above, under this Act or under the provisions of any SGST Act or UTGST Act or the IGST Act in respect of supplies of value exceeding ₹ 1 crore;
• a person who has been accusedof committing an offence under this Act which is also an offence under any other law for the time being in force;
• a person who has been convictedfor an offence under this Act by a Court;
• a person who has been accused of committing an offence specified in clause (g) or clause (j) or clause (k) of section 132 (1) which are as detailed below-
  • obstructs or prevents any officer in the discharge of his duties under this Act; [Section 132(1)(g)]
  • tampers with or destroys any material evidence or documents; [Section 132(1)(j)]
  • fails to supply any information which he is required to supply under this Act or the rules made there under or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; [Section 132(1)(k);

• any other class of persons or offences as may be prescribed.

Any compounding allowed shall not affect the proceedings, if any, instituted under any other law.  Compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences.

Section 139(2) provides that the amount for compounding of offences shall be such as may be prescribed, subject to the minimum amount not being less than ₹ 10,000/- or 50% of the tax involved, whichever is higher and the maximum amount not being less than ₹ 30,000/- or 150% of the tax whichever is higher.

Section 139(3) provides that on payment of such compounding amount no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated. 

Procedure

Rule 162 provides the procedure for compounding of offences.  The following is the procedure-

• An applicant may make an application, either before or after the institution of prosecution in Form GST CPD – 01 to the Commissioner for compounding of an offence;
• On receipt of the application, the Commissioner shall call for a report from the concerned officer with reference to the particulars furnished in the application, or any other information, which may be considered relevant for the examination of such application;
• The Commissioner, if he is satisfied that-

• the applicant has co-operated in the proceedings before him; and
• has made full and true disclosure of facts relating to the case

allow the application, after taking into account the contents of the application  and grant him immunity from prosecution;

• The Commissioner may reject the application;
• Before rejecting the application the applicant shall be given reasonable opportunity of being heard;
• The order should indicate the reasons for such rejection;
• The application shall not be allowed unless the tax, interest and penalty liable to be paid have been paid in the case for which the application has been made;
• The applicant shall pay the compounding amount as ordered by the Commissioner within a period of 30 days from the date of receipt of the order and furnish the proof of such payment to the Commissioner;
• If the applicant fails to pay the compounding amount within 30 days from the date of receipt of the order, the order shall be vitiated and be void;
• The immunity granted to the applicant may be withdrawn at any time by the Commissioner if he is satisfied that the such person had, in the course of the compounding proceedings, concealed any material particulars or had given false evidence;
• Then the applicant may be tried for the offence with respect to which immunity was grantedor for any other offence that appears to have been committed by him in connection with the compounding proceedings and the provisions of this Act shall apply as if no such immunity had been granted.