CMA Final · Indirect Tax Laws and Practice · Refund
Sunrise Exports Pvt Ltd obtained invoices by fraud and used the input tax credit on them to pay duty or tax on goods entered for export under a refund claim. The refund claimed is ₹8,00,000. What is the maximum penalty under section 114AC of the Customs Act, 1962?
The maximum penalty is ₹40,00,000. Section 114AC provides a penalty not exceeding five times the refund claimed for fraudulently obtained invoices used to utilise input tax credit on exported goods, and five times ₹8,00,000 equals ₹40,00,000.
- A₹8,00,000, equal to the refund claimed
- B₹16,00,000, being twice the refund claimed
- C₹40,00,000, being five times the refund claimedCorrect
- D₹80,00,000, being ten times the refund claimed
Explanation
Section 114AC makes a person who fraudulently obtained invoices to utilise input tax credit for duty or tax on goods entered for export under claim of refund liable to a penalty not exceeding five times the refund claimed. Five × ₹8,00,000 = ₹40,00,000. Twice the refund is not the statutory ceiling.
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