Chapter VI OFFENCES ANDPENALTIES

1. (1) Where a taxable person who–
   • (a) owns, operates *or is in control of any machine or process for the purpose of manufacture or production of the specified goods without declaring to the proper officer under this Act; or
   • (b) fails to pay the cess levied under section 4 beyond a period of three months from the date on which such payment becomes due under section 10; or
   • (c) fails to furnish returns as required under section 10 or falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or declaration or return with an intention to evade payment of cess due under the said section; or
   • (d) fraudulently obtains refund of cess; or
   • (e) obstructs or prevents any officer in discharge of his duties under this Act; or
   • (f) is liable to be registered under this Act but fails to obtain registration; or
   • (g) 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; or
   • (h) tampers with, or destroys any material evidence or document; or
     • (i) disposes of or tampers with any goods that have been seized under this Act, the proper officer may, after making such inquiry as he deems fit, impose on such taxable person in addition to the cess leviable, a penalty of ten thousand rupees or an amount equivalent to the cess payable or cess sought to be evaded, or the refund claimed fraudulently, whichever is higher.
2. (2) Any person who aids or abets any of the contraventions specified in clauses (a) to (i) of sub-section (1) shall be liable to a penalty which may extend to one hundred thousand rupees.
3. (3) Any order imposing any such penalty shall be passed by the proper officer only after giving the taxable person a reasonable opportunity of being heard.

1. (1) Whoever commits or causes to commit and retains any benefit arising out of contraventions specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 18 shall be punishable in cases where the amount of cess evaded or the amount of refund wrongly taken—
   • (a) exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years or with fine, or with both; or
   • (b) exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years or with fine, or with both; or
   • (c) exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year or with fine, or with both.
2. (2) Whoever commits or causes to commit and retains any benefit arising out of contraventions specified in clause (f) or clause (i) of sub-section (1) of section 18, or abets the commission of an offence specified in the said sub-section, shall be punishable with imprisonment for a term which may extend to six months or with fine, or with both. CORRIGENDA dated 16th December, 2025
3. (3) Whoever, convicted for an offence under this section is again convicted for an offence under this section, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years or with fine, or with both.
4. (4) The Court may, for special and adequate reasons to be recorded in the judgment, sentence any person to imprisonment under sub-section (1) or sub-section (3), for a term less than six months.
5. (5) Notwithstanding anything contained in the Bharatiya Nagarik Suraksha Sanhita, 2023, all offences under this Act, except the offences referred to in sub-section (6) shall be non-cognizable and bailable.
6. (6) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 18 shall be cognizable and non-bailable.
7. (7) No person shall be prosecuted for any offence under this section except with the previous sanction of the proper officer, not below the rank of Commissioner..

1. (1) Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
2. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
3. (3) Where an offence under this Act has been committed by a taxable person being a partnership firm or a limited liability partnership or a Hindu undivided family or a trust, the partner or kartaor managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall, mutatis mutandis, apply to such persons.
4. (4) Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. Explanation.––For the purposes of this section,–
   • (a) “company” means a body corporate and includes a firm or other association of individuals; and
   • (b) “director”, in relation to a firm, means a partner in the firm.

No Court shall take cognizance of any offence punishable under this

Act or the rules made thereunder except with the previous sanction of the proper officer, not below the rank of Commissioner, and no court inferior to that of a Magistrate of the first class, shall try any such offence.

In any prosecution for an offence under this

Actwhich requires a culpable mental state on the part of the accused, the Court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.

Explanation.—For the purposes of this section,—

1. (a) the expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact;
2. (b) a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.

1. (1) Notwithstanding anything contained in the Bharatiya Nagarik Suraksha Sanhita, 2023, any offence under this Act, not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of prosecution, be compounded by a proper officer, not below the rank of Commissioner, on payment, by the person accused of the offence, to the Central Government of such compounding amount in such manner as may be prescribed.
2. (2) The option of compounding shall not be available to a person—
   • (a) who has been allowed to compound once in respect of any of the offences specified in clauses (a) to (f) of sub-section (1) of section 18 and the offences which are relatable to the said specified offences;
   • (b) who has been allowed to compound once in respect of any offence, other than those in clause (a), under this Act, the cess exceeding one crore rupees;
   • (c) a person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force;
   • (d) a person who has been convicted for an offence under this Act by a Court; and
   • (e) any other class of persons or offences, as may be prescribed.
3. (3) Any compounding shall be allowed only after making payment of cess, interest and penalty involved in such offences and shall not affect the proceedings, if any, instituted under any other law for the time being in force.
4. (4) The amount for compounding of offences under this section shall be such, as may be prescribed, subject to the minimum amount not being less than ten thousand rupees or fifty per cent. of the cess involved, whichever is higher, and the maximum amount not being less than thirty thousand rupees or one hundred and fifty per cent. of the cess, whichever is higher.
5. (5) On payment of such compounding amount as may be determined by the proper officer, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated