The CGST Act provides a comprehensive appellate hierarchy (S.107-121) for challenging adverse orders and a detailed offences and penalties framework (S.122-138) to deter non-compliance. The appellate system ensures judicial review at multiple levels while the penalty framework distinguishes between procedural defaults and serious offences warranting prosecution.
Legal Framework
| Provision | Content |
|---|---|
| S.107 | Appeals to Appellate Authority (First Appeal) |
| S.112 | Appeals to Appellate Tribunal (GSTAT) |
| S.117 | Appeal to High Court |
| S.118 | Appeal to Supreme Court |
| S.108 | Powers of Revisional Authority |
| S.122 | Penalty for certain offences |
| S.123-125 | Penalty for failure to furnish information, general penalty |
| S.130 | Confiscation of goods and conveyances |
| S.132 | Punishment for certain offences (criminal prosecution) |
| S.137 | Offences by companies |
| S.138 | Compounding of offences |
Appellate Hierarchy
| Level | Authority | Section | Time limit | Nature |
|---|---|---|---|---|
| 1st Appeal | Appellate Authority (Commissioner Appeals) | S.107 | 3 months (extendable by 1 month) | Fact + law |
| 2nd Appeal | GST Appellate Tribunal (GSTAT) | S.112 | 3 months (extendable by 1 month) | Fact + law |
| 3rd Appeal | High Court | S.117 | 180 days | Substantial questions of law |
| 4th Appeal | Supreme Court | S.118 | As per SC rules | Questions of law |
| Revision | Commissioner (PCIT equivalent) | S.108 | Within 3 years | Suo motu (erroneous + prejudicial to revenue) |
First Appeal (S.107)
| Element | Detail |
|---|---|
| Against | Any decision/order by adjudicating authority |
| Time limit | 3 months from communication of order |
| Extension | 1 month further (if sufficient cause shown) |
| Pre-deposit | 10% of disputed tax (full amount of admitted tax) |
| Maximum pre-deposit | Rs.25 crore (CGST) |
| Powers | Confirm, modify, annul the order; can remand |
| Stay | Can grant stay of demand pending appeal |
GST Appellate Tribunal (S.112)
| Element | Detail |
|---|---|
| Constitution | National Bench (Principal) + State Benches + Area Benches |
| Composition | President (judicial) + Technical Members (Centre + State) |
| Against | Orders of Appellate Authority |
| Time limit | 3 months from communication of AA order |
| Pre-deposit | 20% of disputed tax (in addition to 10% at first appeal) |
| Powers | Same as Appellate Authority + power to remand |
| Finality | Last fact-finding authority (HC only on law) |
Revisional Authority (S.108)
| Element | Detail |
|---|---|
| Who | Commissioner / Revisional Authority |
| Power | Examine record of any proceedings; pass orders if order is erroneous and prejudicial to revenue |
| Time limit | Within 3 years from date of order; before 6 months of order if appeal period not expired |
| Hearing | Must give opportunity of being heard |
| Restriction | Cannot revise if matter is subject of appeal before AA/Tribunal/HC/SC |
Offences and Penalties (S.122)
| Offence | Penalty |
|---|---|
| Supply without invoice or false invoice | Higher of: Rs.10,000 OR tax amount involved |
| Issue invoice without supply (fake invoice) | Higher of: Rs.10,000 OR tax amount |
| Avails/utilises ITC without actual receipt of goods/services | Same |
| Receives goods/services in violation of Act | Same |
| Fails to deduct TDS or short deducts | Same |
| Obtains fraudulent refund | Same |
| Falsifies financial records or produces fake accounts | Same |
| Obstructs officer in discharge of duties | Same |
| Transports goods without prescribed documents | Same |
| Suppresses turnover | Same |
Prosecution (S.132)
| Offence | Punishment |
|---|---|
| Supply without invoice to evade tax (amount > Rs.5 crore) | Up to 5 years imprisonment + fine |
| Supply without invoice (Rs.2-5 crore) | Up to 3 years + fine |
| Supply without invoice (Rs.1-2 crore) | Up to 1 year + fine |
| Availing/utilizing ITC on fake invoice (> Rs.5 crore) | Up to 5 years + fine |
| Fake invoices (Rs.2-5 crore) | Up to 3 years + fine |
| Obstructing officer | Up to 6 months + fine |
| Repeat offender | Enhanced punishment |
| Cognizance | Only with prior sanction of Commissioner |
Compounding of Offences (S.138)
| Element | Detail |
|---|---|
| Who can apply | Accused (after proceedings commenced) |
| Who compounds | Commissioner |
| Compounding amount | Minimum: greater of Rs.10,000 or 50% of tax involved; Maximum: greater of Rs.30,000 or 150% of tax |
| Non-compoundable | Offences where tax amount > Rs.1 crore, habitual offenders, offences under other Acts |
| Effect | Proceedings dropped; no conviction recorded |
Why: Compounding offers a middle path: serious enough to deter (penalty amount) but avoids criminal record. It reduces court burden and incentivises offenders to settle.
Recall Check
- What is the pre-deposit requirement for first appeal under S.107?
- What is the maximum imprisonment under S.132 for tax evasion exceeding Rs.5 crore?
- What is the power of the Revisional Authority under S.108?
Key Cases
Union of India v. Mohit Minerals (2022) Union-of-India-v-Mohit-Minerals-2022 Issue: Whether the GST Tribunal (GSTAT) is necessary for effective appellate remedy under the CGST Act. Rule: S.112 provides for appeal to GSTAT; until constituted, HCs exercise writ jurisdiction for interim relief. Held: The non-constitution of GSTAT creates a vacuum in the appellate hierarchy. Until GSTAT is constituted, assessees can approach the High Court directly under Art.226 for challenging orders that would otherwise go to the Tribunal. The SC emphasised the urgent need to constitute GSTAT.
Distinctions
| Feature | Penalty (S.122) | Prosecution (S.132) |
|---|---|---|
| Nature | Civil/monetary | Criminal |
| Forum | Adjudicating authority | Magistrate's Court |
| Outcome | Fine/penalty | Imprisonment + fine |
| Standard of proof | Preponderance of probability | Beyond reasonable doubt |
| Parallel | Can run alongside prosecution | Can run alongside penalty |
| Threshold | No minimum (any offence) | Tax amount > Rs.1 crore (for imprisonment > 1 year) |
| Compounding | Not applicable (already monetary) | Available under S.138 |
| Sanction | Not required | Prior sanction of Commissioner required |
Flashcards
Q: What is the time limit for first appeal under S.107? A: 3 months from the date of communication of the order (extendable by 1 month).
Q: What is the pre-deposit for first appeal? A: 10% of disputed tax amount (full amount of admitted tax must be paid).
Q: What is the maximum imprisonment for GST fraud exceeding Rs.5 crore? A: Up to 5 years imprisonment with fine (S.132).
Q: What is the appellate hierarchy under GST? A: Adjudicating Authority → First Appellate Authority (S.107) → GSTAT (S.112) → High Court (S.117) → Supreme Court (S.118).
Q: What is compounding under S.138? A: Settlement of criminal proceedings by paying a compounding amount (50%-150% of tax), avoiding prosecution and conviction.
Q: Until GSTAT is constituted, where can assessees appeal? A: Directly to the High Court under Art.226 (Mohit Minerals).
Exam Scenario
M/s Fraudco issues fake invoices worth Rs.3 crore (without actual supply) to enable ITC claims by recipients. The GST department initiates both penalty proceedings under S.122 and prosecution under S.132. Fraudco argues that penalty and prosecution for the same offence amounts to double jeopardy. Advise.
Approach: Penalty under S.122 is civil/monetary in nature. Prosecution under S.132 is criminal. Article 20(2) (double jeopardy) protects against being "prosecuted and punished" twice for the same offence. Civil penalty is not "punishment" within Art.20(2). Both proceedings can run parallelly without violating double jeopardy. The penalty is the higher of Rs.10,000 or the tax amount involved. For prosecution: Rs.3 crore falls in the Rs.2-5 crore bracket → up to 3 years imprisonment + fine. Commissioner's prior sanction (S.132(6)) is required before filing complaint. Fraudco's double jeopardy argument fails.