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CA Final · Indirect Tax Laws · Offences and Penalties and Ethical Aspects under GST

Mehta Textiles Ltd. was accused of an offence under clause (b) of section 132(1) of the CGST Act, 2017. The company has never been allowed to compound any offence and has never been convicted. It applies for compounding after paying tax, interest and penalty. Under the proviso to section 138(1), what is the position?

Compounding is not available. Section 138(1) excludes a person accused of an offence under clause (b) of section 132(1), regardless of a clean record on earlier compounding or conviction. Section 138 allows compounding before or after prosecution, so the stage of the proceedings is not the deciding factor.

  1. ACompounding is available because it has not compounded earlier
  2. BCompounding is available only if the offence is punishable under clause (i) of section 132(1)
  3. CCompounding is not available because the person is accused of an offence under clause (b) of section 132(1)Correct
  4. DCompounding is available only before prosecution is instituted

Explanation

The proviso to section 138(1) excludes a person who has been accused of committing an offence under clause (b) of section 132(1). This bar applies even when the person has no earlier compounding or conviction. Section 138(1) permits compounding before or after prosecution, so the timing option is also wrong.

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