Page 8 - Chap21 Offences & Penalties

Ø ₹ 10,000 or
Ø an amount equivalent to the ITC availed of or passed on
Ü As per section 122(1A), any person at whose instance above transactions are conducted shall be
liable to a penalty of an amount equivalent to ITC availed of or passed on.

Ü Further As per Sec 74 of CGST Act, If any person chargeable with tax due to wrongful availment and
utilization of ITC by reason of fraud etc. pays the said tax along with interest payable u/s 50 and a
penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceedings in respect
of the said notice shall be deemed to be concluded.

Discussion & Conclusion:
Ü In the given case, M/s Blue Berry Traders issued an invoice without any supply of goods or services.
So, it shall be liable to pay a penalty of ` 30,00,000 each under CGST & SGST, which is higher of the
following:-

Ø ₹ 10,000 or
Ø ₹ 30,00,000
Ü Also , M/s Blue Lagoon Traders has to pay penalty of ₹ 7,50,000 (₹ 30 lakh x 25%) each under CGST
and SGST.

Ü M/s Blue Berry Traders conducted the said transaction at the instance of tax consultant and thus,
the tax consultant will be liable to pay a penalty of ₹30 lakh.

CCP 21.01.05.01
ABC Ltd. is a manufacturer of textiles and has recently installed five new dyeing machines in their

factory in Gujarat which were purchased locally. As per a special procedure notified u/s 148 of
CGST Act, ABC Ltd. was required to register these machines by October 31, 20XX. However, due
to an oversight, they failed to register two of these machines by the due date. On November 10,
20XX, a GST officer conducted an inspection and issued a penalty order u/s 122A & communicated

the same. What will be the consequences for ABC Ltd. under the GST law, and how can they avoid
confiscation of the machines?
Answer : Since ABC Ltd. failed to register 2 machines under special procedure notified u/s 148,
following consequences will apply:

1) Penalty for Non- ABC Ltd. will be liable to pay a penalty of ` 2 lakhs each under CGST &
Registration: SGST for 2 unregistered machines & thus, total penalty under CGST
and SGST = ₹4 lakhs.
Additional Penalties: This penalty will be in addition to any other penalties payable under
2)
demand & recovery or any other provisions applicable under GST law.

3) Seizure & The 2 unregistered machines will be seized and liable for confiscation.
Confiscation
4) Avoiding ABC Ltd. can avoid the confiscation of machines by:
Confiscation: a) Paying penalty of ₹4 lakh (₹2 lakh for each machine under CGST &

SGST) &
b) Registering 2 unregistered machines as per special procedure within 3
days from the receipt of communication of penalty order (November
10, 20XX).

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