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

Sundaram Exports applied for compounding under section 138 of the CGST Act. Consider these facts: (1) it has never compounded before; (2) it has not been convicted by a court; (3) it is accused of an offence under clause (b) of section 132(1); (4) it has paid tax, interest and penalty in full. Based on the official text, which conclusion is correct?

Compounding is not allowed. Section 138 specifically excludes a person accused of an offence under clause (b) of section 132(1). Having no earlier compounding, no conviction and having paid tax, interest and penalty does not help, because the exclusion applies to the category of offence itself.

  1. ACompounding is allowed, since tax, interest and penalty have been paid
  2. BCompounding is allowed only if the Commissioner fixes 100% of tax involved as the amount
  3. CCompounding is not allowed, because a person accused of an offence under clause (b) of section 132(1) is excludedCorrect
  4. DCompounding is allowed only after conviction by a court

Explanation

The proviso to section 138(1) excludes a person accused of committing an offence under clause (b) of section 132(1). Payment of tax, interest and penalty is only a precondition for those otherwise eligible, and does not cure an excluded category. Facts (1), (2) and (4) are therefore irrelevant to the outcome.

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