Page 7 - Chap21 Offences & Penalties

Answer :

(a) Legal Provision:-
Ü As per section 122(1) of CGST Act, if a taxable person collects any tax in contravention of the
provisions of CGST Act, but fails to pay the same to the Government within 3 months from the
date on which such payment becomes due, then such person shall be liable to pay a penalty
which shall be higher of the following:-

Ø ₹ 10,000 or
Ø an amount equivalent to the tax evaded.
Discussion & conclusion:

Ü In the given case, Nirmal Private Limited has collected tax at a wrong rate (i.e. 28%), but fails to
deposit the full tax collected to the Government i.e. it deposits only tax @ 18% thereby
retaining the remaining tax collected.
Ü Thus, the penalty that can be imposed on Nirmal Private Limited is ₹ 50,000 which is
higher of the following:-

a) ₹ 10,000 or
b) Tax evaded ₹ 50,000 i.e. [(₹ 5,00,000 × 28%) - (₹ 5,00,000 × 18%)].

(b) Legal Provision:-
Ü As per Section 122(3) of CGST Act, 2017, if any person to whom a summon is issued for
appearance to give evidence or produce a document in an inquiry fails to appear before the
officer of central tax, then he shall be liable to a penalty which may extend to ₹ 25,000.
Discussion & Conclusion:-
Ü In given case, if Bindusar fails to appear before the central tax officer, then a penalty upto ₹

25,000 can be imposed on him.

CCP 21.01.05.00

M/s Blue Berry Traders, a registered person under GST, issued a tax invoice on 1st August, 20XX
to M/s Blue Lagoon Traders without any underlying supply of goods or services amounting to
Input Tax Credit (ITC) involved of ₹ 30 lakh. M/s Blue Berry Traders conducted this transaction at
the instance of its tax consultant who was not a qualified professional.
M/s Blue Lagoon Traders avails ITC on the basis of the said tax invoice. The department issued a

show cause notice to M/s Blue Lagoon Traders on 1st April, 20XX specifying the amount of tax
along with interest payable thereon u/s 50 and applicable penalty. M/s Blue Lagoon Traders paid
the amount of tax along with interest payable thereon u/s 50 specified in the show cause notice on

15th April, 20XX and also along with applicable penalty.
Explain the relevant provision in brief and determine the amount of penalty to be paid by M/s Blue
Berry Traders, M/s Blue Lagoon Traders and Tax consultant under CGST Act, 2017 in respect of
above referred transaction. [CA Final May 23 Exam Similar] [CA Final Dec 21 Exam (Similar)]
Answer:- Legal Provision:-

Ü As per section 122(1) of CGST Act, if a taxable person
a) issues any invoice without supply of goods, or
b) takes or utilises ITC without actual receipt of goods, fully or partially, in contravention of the
provisions of GST law or rules made thereunder, then such person shall be liable to pay a penalty

which shall be higher of the following:-

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