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CA Final · Indirect Tax Laws · Refund

Rohan Textiles, a merchant exporter, procured invoices through collusion and wilful suppression of facts and used input tax credit on them to discharge IGST on goods entered for export under claim of refund. The refund claimed was Rs 8,00,000. What is the maximum penalty under section 114AC of the Customs Act, 1962?

The maximum penalty is Rs 40,00,000. Section 114AC provides a penalty not exceeding five times the refund claimed where invoices were obtained by fraud, collusion, wilful misstatement or suppression and the credit was used for goods exported under refund claim; five times Rs 8,00,000 equals Rs 40,00,000.

  1. ARs 8,00,000, being equal to the refund claimed
  2. BRs 24,00,000, being three times the refund claimed
  3. CRs 40,00,000, being five times the refund claimedCorrect
  4. DRs 80,00,000, being ten times the refund claimed

Explanation

Section 114AC applies where a person obtained an invoice by fraud, collusion, wilful misstatement or suppression of facts and used the credit to pay duty or tax on goods exported under claim of refund. The penalty is not exceeding five times the refund claimed, so the maximum is 5 x 8,00,000 = Rs 40,00,000. Three times or equal to the refund understates the statutory ceiling.

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