2026-VIL-265-GSTAT-BLR
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SGST Tribunal

GST - Penalty under Section 122(1)(x) of the CGST Act, 2017 for producing fake accounts or documents with intention to evade tax - Effect of the Board Circular No. 171/3/2022 - GST dated 06.07.2022 on fake invoice transactions – Appellant-Department, challenged the order of the FAA which deleted the penalty imposed on the Respondent - The adjudicating authority dropped the demand of tax in line with the Circular but imposed penalties under Sections 122(1)(vii) and 122(1)(x) - The FAA deleted the penalty under clause (x) holding that it was contrary to the Circular, which allowed penal action only under Sections 122(1)(ii) and 122(1)(vii) - Whether deletion of penalty under Section 122(1)(x) was just and valid - HELD - Section 122(1)(x) applies where a taxable person falsifies financial records, produces fake accounts or documents or furnishes false information or return with intention to evade tax. The Circular states that where credit is claimed and invoices are issued without actual receipt or supply of goods, no demand can be made under Section 73 or 74 and the taxpayer is liable for penal action under Sections 122(1)(ii) and 122(1)(vii). The adjudicating authority acted in accordance with the Circular in dropping the tax demand - A Circular cannot be read contrary to the statute or restrictively so as to curtail the proper officer's power to invoke the sub-clauses of Section 122(1). The Respondent had given contradictory statements, admitted issuing and receiving bills without supply of goods, and the invoices were dated after cancellation of the registrations of the suppliers and recipients. The adjudicating authority specifically recorded that the Respondent created fake accounts and documents and filed returns without underlying supply of goods - The reasoning that the nature of the offence was not specified is incorrect, and the deletion of penalty under Section 122(1)(x) is improper and unjustified – The Order-in-appeal is set aside. The penalties under Section 122(1)(vii) and 122(1)(x) imposed are restored – The appeal is allowed - Penalty under Section 122(1)(vii) of the CGST Act, 2017 for taking and utilising ITC without actual receipt of goods - Evidentiary value of statements recorded under Section 70 - Burden of proof under Section 155 and Section 16(2) - Appellant contended that the adjudicating authority had examined the inward suppliers and outward recipients and found them non-existent, and that voluntary statements which were never retracted can be relied upon - Whether deletion of penalty under Section 122(1)(vii) was just and valid - HELD - The Respondent had admitted that the premises were used for fake transactions, that fake invoices were provided to traders, and that the same invoices and e-way bills were used for two consignments - Under the Act, the burden is on the taxpayer to prove eligibility for input tax credit. The taxpayer was required to prove that he had received the goods under Section 16(2)(b) and the supplier had paid tax under Section 16(2)(c), to claim the benefit of ITC. The taxpayer did not prove that he received the goods. He also has not proved that the suppliers paid tax to the Government. The taxpayer did not furnish documents to prove the genuineness of his dealings. The taxpayer admitted that he had provided fake invoices to various traders, who used them to pay GST liability - The deletion of penalty under Section 122(1)(vii) is invalid.
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