CGST Section 122A — Penalty for failure to register certain machines used in manufacture of goods as per sp

CGST Act · Penalty for failure to register certain machines used in manufacture of goods as per sp

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Quick Answer

Section 122A of the CGST Act, 2017 governs Penalty for failure to register certain machines used in manufacture of goods as per sp. It provides the core statutory basis, outlining the essential legal principles, rights, and liabilities under Indian indirect tax law. Section 122A GST: Penalty for failure to register certain machines used in — eligibility, conditions, case laws and compliance impact under Indian tax law.

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Plain-English Explanation

Plain English Summary

Section 122A of the CGST Act deals with penalties for businesses that fail to register certain machines used in the manufacture of goods, as required by special procedures notified by the government. Essentially, it ensures compliance with specific registration requirements for machinery when the government mandates it for particular industries or goods.

This section applies to any person or business involved in the manufacture of goods for which a "special procedure" for machine registration has been notified under Section 148 of the CGST Act. Section 148 empowers the government to specify special procedures for various aspects of GST compliance, including the registration of machinery used in manufacturing. If such a special procedure exists for your industry or specific goods you manufacture, then Section 122A comes into play. This typically happens when the government wants to closely monitor production for revenue leakage or other compliance reasons.

Here's a breakdown of the key conditions and exceptions:

Trigger: The primary trigger is the failure to register a machine used in the manufacture of goods when a special procedure for such registration has been notified under Section 148. The Government must specifically announce such procedure for the particular product you are producing.
Penalty: A fixed penalty of ₹1,00,000 is levied for every machine that is not registered as per the special procedure. This penalty is in addition to any other penalties that may be applicable under Chapter XV of the CGST Act (relating to demand and recovery) or other provisions within Chapter XIV (relating to inspection, search, seizure and arrest).
Seizure and Confiscation: In addition to the monetary penalty, any unregistered machine is liable for seizure and confiscation by the tax authorities.
Exception to Confiscation: The law provides a pathway to avoid confiscation. The machine will not be confiscated if:
- The imposed penalty of ₹1,00,000 per machine is paid.
- The registration of the machine is completed according to the special procedure within three days of receiving the order for penalty. Note that you still must pay the penalty.

Practical Examples for Business Owners:

Tobacco Manufacturer: Imagine a tobacco manufacturer. If the government, through a notification under Section 148, mandates that all cigarette-making machines must be registered with the GST department following a specific procedure (perhaps including serial numbers, production capacity, etc.), then failing to register each machine would attract a penalty of ₹1,00,000 per machine. Furthermore, the unregistered machines could be seized.
Textile Industry: Suppose the government introduces a special procedure for registering power looms in the textile industry to curb tax evasion. If a textile business fails to register its power looms as per the notified procedure, it would be liable for the penalty under Section 122A.
Edible Oil Manufacturer: Similarly, if the government publishes specific registration rule for edible oil manufacturing, the manufacturer must abide by those rules or is liable to pay the fine.

Important Considerations:

Awareness is Key: Businesses must stay updated on notifications issued under Section 148 that might affect their industry or the goods they manufacture. Regularly checking the CBIC (Central Board of Indirect Taxes and Customs) website and consulting with tax professionals is crucial.
Document Everything: Keep detailed records of all machines used in manufacturing, including their specifications, purchase dates, and registration status. This documentation can be invaluable during audits or investigations.
Proactive Compliance: If a special procedure is notified, take immediate steps to comply with the registration requirements. Don't wait until the last minute.

Amendment History:

It's important to note that Section 122A was inserted into the CGST Act with effect from October 1, 2024, by Section 13 of The Finance (No. 8) Act, 2024. This is a relatively recent addition to the law, so businesses should be aware of its implications and ensure they are compliant.

* Section122.Penalty for certain offences.-

(1)Where a taxable person who-

(i)supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii)issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

(iii)collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

(iv)collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

(v)fails to deduct the tax in accordance with the provisions of sub-section (1) ofsection 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax;

(vi)fails to collect tax in accordance with the provisions of sub-section

(1)ofsection 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) ofsection 52;

(vii)takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(viii)fraudulently obtains refund of tax under this Act;

(ix)takes or distributes input tax credit in contravention ofsection 20, or the rules made thereunder;

(x)falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act;

(xi)is liable to be registered under this Act but fails to obtain registration;

(xii)furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently;

(xiii)obstructs or prevents any officer in discharge of his duties under this Act;

(xiv)transports any taxable goods without the cover of documents as may be specified in this behalf;

(xv)suppresses his turnover leading to evasion of tax under this Act;

(xvi)fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder;

(xvii)fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act;

(xviii)supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act;

(xix)issues any invoice or document by using the registration number of another registered person;

(xx)tampers with, or destroys any material evidence or document;

(xxi)disposes off or tampers with any goods that have been detained, seized, or attached under this Act, he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted undersection 51or short deducted or deducted but not paid to the Government or tax not collected undersection 52or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.

(1A)Any person who retains the benefit of a transaction covered under clauses (i), (ii),

(vii)or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.

(1B) ¹Any electronic commerce operator, who is liable to collect tax at source under section 52,²—¹

(i)allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;]

(ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or¹

(iii)fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act, shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher]Any electronic commerce operator, who is liable to collect tax at source under section 52,²—

(i)allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;

(ii)allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or

(2)Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,-

(a)for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher;

(b)for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher.

(3)Any person who-

(a)aids or abets any of the offences specified in clauses (i) to (xxi) of subsection (1);

(b)acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;

(c)receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;

(d)fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry;

(e)fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account, shall be liable to a penalty which may extend to twenty-five thousand rupees.

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Frequently Asked Questions

What is CGST Section 122A about, and what goods does it typically concern?

CGST Section 122A deals with the penalty imposed for failing to register certain machines used in the manufacture of goods as mandated by any specific notification or rule under the CGST Act. This typically concerns goods where there's a high risk of tax evasion, like tobacco, pan masala, or similar items, where machine registration helps track production and prevent unaccounted stock.

What is the penalty for non-compliance under CGST Section 122A?

Under CGST Section 122A, the penalty for failing to register specified machines is ₹25,000. This penalty is irrespective of whether any tax evasion has actually occurred. The mere failure to register the machine as per the rules attracts this penalty.

How do I know if my business needs to register its manufacturing machines under CGST Section 122A?

You need to carefully review any notifications or rules issued by the Central Government regarding specific goods. These notifications will clearly specify which machines need to be registered and the procedure for doing so. Focus on notifications related to the goods your business manufactures. You should also consult a tax professional for guidance.

What are the procedural requirements for registering machines under the specified rules covered by CGST Section 122A?

The exact procedure will be detailed in the relevant notification. Generally, it involves submitting an application in a prescribed form (often online through the GST portal) providing details of the machines, their location, and the manufacturing process. Timelines for registration are also specified in the notification and must be adhered to.

Can the penalty under Section 122A be waived or reduced?

While the law itself does not provide for a waiver of the penalty, the proper officer has the discretion to consider mitigating circumstances. It's crucial to present a valid reason for the delay or non-compliance and demonstrate your intention to comply with the rules. However, the decision rests solely with the officer.

If I have multiple machines used for manufacturing the specified goods, is the penalty applicable for each unregistered machine?

The applicability of the penalty to each machine depends on the specific wording of the notification and how it defines the registration requirement. Some notifications may require registration of each individual machine, while others may require registration of a set or type of machine. You need to read the notification carefully to determine the number of penalties applicable for non-compliance.

What if I am unaware of the notification requiring machine registration? Can I avoid the penalty under Section 122A?

Ignorance of the law is generally not a valid defense. It is your responsibility as a business owner to stay informed about the applicable laws and regulations related to your industry and business operations. Therefore, being unaware of the notification may not automatically exempt you from the penalty. Proactive monitoring of government notifications and consulting with a tax professional is highly recommended.

Key Conditions & Requirements

Condition	Details
Engagement in Manufacture	The person must be engaged in the manufacture of goods.
Special Procedure Notification	A special procedure relating to registration of machines has been notified under section 148 for the goods being manufactured.
Contravention of Special Procedure	The person acts in contravention of the special procedure notified under section 148.
Failure to Register Machine	Failure to register machines as per the notified special procedure results in a penalty.
Monetary Penalty	A penalty of one lakh rupees is levied for every machine not so registered, in addition to other penalties under Chapter XV or this Chapter.
Seizure and Confiscation	Every unregistered machine is liable for seizure and confiscation, in addition to the monetary penalty.
Avoidance of Confiscation	Confiscation can be avoided if the penalty is paid and the machine is registered within three days of the communication of the penalty order.

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Amendment History

Enforced w.e.f. 1st July, 2017 . Inserted (vide Notification No 92/2020- C.T , dated 22-12-2020 by s.126 of The Finance Act, 2020 (No. 12 of 2020) - Brought into force w.e.f. 01st January, 2021.

12Superscript numbers in the text mark amended passages — click them to jump here. Click "↑ view in text" to jump back.

2023↑ view in text

Inserted ( w.e.f. 1st October, 2023 vide Notification No. 28/2023 - CT dated 31st july, 2023. ) by s. 155 of The Finance Act 2023 (No. 8 of 2023).