PROSECUTION AND COMPOUNDING OF OFFENCE UNDER CST LAW

• Four punishments have been prescribed under CST law when a prosecution is launched by department.
• Details of punishment prescribed in GST Law are- 

1. in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees (exceeds Rs. 5 crores), with imprisonment for a term which may extend to five years and with fine;
2. in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees (between Rs. 2 crores and Rs. 5 crores), with imprisonment for a term which may extend to three years and with fine 
3. in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees (between Rs. 1 crore and Rs. 2 crores), with imprisonment for a term which may extend to one year and with fine 
4. in cases where he commits or abets the commission of an offence of falsification of records or submits false information or obstructs officials, he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both. 

• Thus, Minimum imprisonment is six months with fine while maximum is five years with fine.
• The case is to be tried by a Court not inferior to First Class Magistrate.
• Cognizance shall be taken only if complaint is filed with previous sanction of the Commissioner 

Offences by companies

1. Person who was in-charge of the company and was responsible for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly
2. Where consent or connivance to the offence or negligence on part of director, manager, secretary or other officer of the company is established they can also be liable to prosecution. 
3. In case of partnership firm or a limited Liability partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee are also liable to prosecution.
4. It is on concerned person to prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence

Compounding of offences 

• GST law also provides for compounding of offenses in case the concerned person wishes to avoid litigation 
• Compunding of offence shall be allowed only after making payment of tax interest and penalty involved in such offences 
• Compounding of offence will not be available for second time offender of cognizable offences or where earlier evasion was of more than Rs one crore. 
• Compounding of offence will also not be available to person accused of committing an   offence under GST law which is also an offence under any other law for the time being in force. 
• A person who has been convicted for an offence under GST law or is accused of committing certain specified offences is also not eligible for compounding of offence.
• Procedure for compounding of offences 
• An application in FORM GST CPD-01 has to be filed by concerned person to the Commissioner for compounding of an offence. 
• The application can be filed either before or after the institution of prosecution.
• If satisfied, about true disclosure, Commissioner will pass an order in FORM GST CPD-02, allowing the application indicating the compounding amount and grant him immunity from prosecution.
• If not satisfied, he can reject application after affording an opportunity of hearing to applicant.
• The entire exercise of acceptance or rejection has to be completed within ninety days of the receipt of the application. 
• 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 compounding fee will be paid within 30 days the course of the compounding proceedings, concealed any material particulars or had given false evidence The immunity can be withdrawn by the Commissioner, if he is satisfied that such person had, in the course of the compounding proceedings, concealed any material particulars or had given false evidence.