The CBIC vide instruction No. 04/2022-23 [GST – Investigation] dated 01 September 2022 has issued guidelines for initiating prosecution under the CGST Act. The Instructions inter alia provide that any person who violates the provision of section 132 of the CGST Act, may be subjected to criminal proceedings and prosecution. Following are the key highlights of the Instructions.
Sanction of prosecution
- The consequences of a criminal prosecution are drastic, so the nature of evidence collected during the investigation should be carefully assessed and proven beyond a reasonable doubt that the accused was guilty and had mens-rea for committing the offence. Decisions should be made case-by-case based on the severity of the crime and the nature and quality of the evidence collected.
- The Prosecution can be initiated only after adequate evident and not merely on technical grounds. Further prosecution cannot be indiscriminately made against all directors of the company and that it should be only restricted to persons who oversee day-to-day operations.
SC’s observations in RE: Radheshyam Kejriwal [(2011)3SCC 581]
- The Prosecution complaint may be filed prior to adjudication or even before a show cause notice is issued, particularly if the offender has been arrested u/s 69 of the CGST Act, the offence is serious, or there is evidence that the concerned person may delay adjudication proceedings.
Monetary limits
- 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 is more than Five Hundred Lakh rupees. However, in following cases, the said monetary limit shall not be applicable:
- Habitual evaders: A company/taxpayer can be prosecuted for habitual tax evasion, ITC misuse, or fraudulent refund. A company/taxpayer is considered a habitual evader if it has been involved in two or more recorded instances of tax evasion/fraudulent refund or misuse of ITC involving fraud, suppression of facts, etc. in the past two years and the total tax evaded, total ITC misused, and/or fraudulently obtained refund exceeds Five Hundred Lakh rupees. DIGIT can identify habitual evaders.
- Arrest Cases: Instances in which arrests were made pursuant to Section 69 of the CGST Act during the course of an investigation.
Authority to sanction prosecution
- The prosecution complaint should only be filed with the Pr. Commissioner/Commissioner of CGST's approval, per section 132(6) of the CGST Act.
- In DGGI-investigated cases, the prosecution complaint should be filed only with the Pr. Additional Director General/Additional Director General of the concerned zonal unit/HQs.
Procedure for sanction of prosecution
- When an investigation results in arrests u/s 69 of the act without bail, a prosecution complaint should be filed within 60 days of arrest. In all other arrest cases, prosecution must file a complaint within a certain timeframe. The proposal of filing complaint has to be in the format of investigation report prescribed in Annexure-I.
- As per the provision of sec 137(i) of the CGST Act, companies, both the legal person as well as natural person are liable for prosecution under section 132 of the CGST Act. Similarly, under section 137(3), the provisions have been made for partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a Trust.
- In cases investigated by DGGI, except for single/multiple taxpayer(s) under Central Tax administration in one Commissionerate, prosecution complaints shall be filed and followed up by DGGI. In other cases, the complaint must be filed by a Superintendent authorised by the Pr. Commissioner/Commissioner of CGST. In all DGGI-investigated cases, the prosecution must be approved by a DGGI officer.
Appeal against Court order in case of inadequate punishment/acquittal
- Prosecution Cell in the Commissionerate shall examine the judgment of the Court and submit their recommendations to the Pr. Commissioner/ Commissioner, in cases where appeal is required to be filed.
Procedure for withdrawal of prosecution
- If a prosecution is sanctioned without a complaint, the Commissionerate should notify the sanctioning authority immediately. The sanctioning authority may recommend dropping charges after reviewing new evidence.
General guidelines
- The officer authorised to file a complaint is also responsible for all required documents, statements, and exhibits that would be required to be produced before a Court. The board advised officials to consult with the Public Prosecutor while finalising the draft of the complaint.
- The Superintendent in-charge of adjudication section should endorse copy of all adjudication orders to the prosecution section.
Publication of names of persons convicted
- Section 159 of the CGST Act allows the Pr. Commissioner/Commissioner or any officer he authorises to publish the name and other details of a convicted person. In deserving cases, the department must invoke this section for all the convicts.
Monitoring of prosecution
- Once prosecution is started, it should be vigorously pursued. The officer should monitor prosecution cases monthly and take corrective action where necessary to ensure satisfactory prosecution progress. Within 48 hours of sanctioning a prosecution, all cases should be entered into DIGIT/Investigation Module and updated regularly.
Compounding of offence
- Under section 138 of the CGST Act, the Pr. Commissioner or Commissioner to compound offences upon payment of a compounding amount. The prosecuting party shall be made aware of this, and the responsible official should make a compounding offer to that party.
Transitional Provisions
- Cases sanctioned for prosecution following these instructions are handled according to their rules, regardless of the date of the offence. Cases where prosecution has been sanctioned but no complaint has been submitted before the magistrate will also be evaluated under these directions.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.