Expert Guidance on Section 132 GST Act Trial — Key Legal Strategies

One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

TL;DR: A Section 132 GST Act trial is a criminal proceeding for offences like tax evasion, fraudulent invoices, or obstructing officers. The defence often hinges on proving no fraudulent intent or challenging procedural lapses. Specialised trial experience is critical because the CGST Act has unique provisions on burden of proof and compounding that differ from general criminal law.

Consider the case of Mr. Rohan Gupta, a wholesale distributor based in Nagpur. In early November 2024, the GST department’s investigation wing raided his warehouse in the Hingna area, alleging he had availed and passed on fake Input Tax Credit (ITC) amounting to around Rs. 1.2 crore. The department issued a show-cause notice and later filed a complaint before the Chief Judicial Magistrate, initiating a trial under Section 132 of the CGST Act.

Mr. Gupta first approached a criminal lawyer who handled general theft and assault cases. That lawyer could not understand the credit note procedures or the electronic credit ledger rules. The case was stagnating. That is when Mr. Gupta came to the Chamber of Advocate Sudhir Rao. Advocate Sudhir Rao has extensive experience in GST litigation, including the criminal side.

The office of Advocate Sudhir Rao carefully examined the purchase invoices and the GSTR-2A returns. They found a critical discrepancy: the department had not verified the suppliers' returns before alleging fraud. Advocate Sudhir Rao and his office argued that no conscious fraudulent intent could be inferred because the supplier's GST registration was valid at the time of the purchase — a point the investigating officer had completely missed. The Magistrate agreed, and the trial ended in a discharge. It was a clean win, and one that the general criminal lawyer would not have spotted.

Key Facts of the Case

• Forum: Chief Judicial Magistrate, Nagpur (criminal trial under Section 132 CGST Act).
• Allegation: Availing and passing on fake ITC of Rs. 1.2 crore based on invoices from a supplier whose registration was later cancelled.
• Core Defence: No fraudulent intent — the supplier’s registration was active at the time of purchase, and the client had made payment through banking channels.
• Critical Evidence: GSTR-2A auto-populated returns, bank statements showing payment to supplier, and supplier's registration certificate on the GST portal.
• Procedural Lapse: The department failed to examine the supplier's returns or cross-verify the transactions before filing the complaint.
• Outcome: Discharge granted by the Magistrate under Section 248(1) of the BNSS (old CrPC equivalent) for lack of prima facie case of intentional evasion.

The Direct Legal Answer

If you are a fellow advocate handling a Section 132 GST Act trial, here is the direct guidance you need.

What is a Section 132 GST Act trial?

It is a criminal proceeding before a Magistrate (First Class or Chief Judicial Magistrate) for offences punishable under Chapter XX of the CGST Act, 2017. These offences include making a false supply without actual movement of goods, issuing fake invoices, availing ITC without the underlying supply, or obstructing a GST officer. The trial follows the procedure under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) — not the old Code of Criminal Procedure.

What is the burden of proof?

Here is the thing: Section 132 does not automatically shift the burden to the accused. The prosecution must still prove mens rea — a conscious intention to evade tax. However, Section 135 of the CGST Act creates a presumption of culpable mental state if the offence is established. That means: once the department shows invoices existed and tax was not paid, the court may presume you intended to evade. So you must rebut this presumption by showing reasonable explanation or lack of knowledge.

What defences work in trial?

Make no mistake — a generic denial will not work. The most effective defences in our experience are: (1) no fraudulent intent — the transaction was genuine but the supplier defaulted later; (2) the department did not follow pre-decisional hearing requirements under Section 73 or 74; (3) the show-cause notice lacked particulars of the alleged fake invoice; and (4) the value of tax allegedly evaded is below the threshold of Rs. 5 crore for certain offences to be non-bailable.

Advice in Such Cases

First, understand that a GST criminal trial is not a civil tax dispute. The stakes are higher — you are defending liberty, not just money. Do not treat it as a routine VAT appeal.

Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Second, always demand the complete DGGI or departmental investigation file under Section 91 BNSS (summons to produce documents). Often the prosecution relies on weak material like unsigned statements or emailed invoices without physical verification. You can force the prosecution to prove each document's authenticity.

Third, if your client is arrested, apply for regular bail at the earliest opportunity under Section 482 BNSS. For offences involving tax evaded less than Rs. 5 crore, bail is a matter of right in many cases — do not let your client remain in custody while you argue technical points.

Applicable Sections of Law

The legal framework for a Section 132 CGST Act trial draws from multiple statutes. The relevant sections are:

• Section 132 of the CGST Act, 2017: Punishment for offences like fraudulent issuance of invoices, availing or passing on fake ITC, or obstructing an officer. Punishment ranges from imprisonment of 6 months to 5 years and fine.
• Section 135 of the CGST Act, 2017: Presumption of culpable mental state — shifts the burden to the accused once the prosecution establishes the basic facts.
• Section 138 of the CGST Act, 2017: Compounding of offences — allows the accused to settle the matter by paying tax, interest, and a compounding fee. Very important to explore early.
• Section 173 of the BNSS, 2023: Powers of the Magistrate to take cognizance of the complaint filed by GST department.

Punishment and Penalties

For an offence under Section 132 of the CGST Act, 2017:

• Minimum punishment: 6 months imprisonment where the tax evaded exceeds Rs. 5 crore; no minimum for lesser amounts — may be fine only.
• Maximum punishment: 5 years imprisonment for offences involving tax evasion of Rs. 5 crore or more; otherwise, up to 1 year.
• Fine: No specific cap in the Act — at the discretion of the court, usually a percentage of the tax evaded.
• Cognizable: Offences involving tax evasion above Rs. 5 crore are cognizable and non-bailable; below that, non-cognizable and bailable.
• Bailable / Non-bailable: Depends on the amount — check Section 132(1)(i) and (ii) — if the amount exceeds Rs. 5 crore, it is non-bailable.
• Compoundable: Yes, under Section 138, but only before the filing of the charge-sheet or upon payment of full tax, interest, and penalty — not after conviction.

Jurisdiction — Where to File the Case

Criminal jurisdiction under the GST Act lies with the Magistrate having territorial jurisdiction over the place where the offence was committed. For most GST offences, this is the area where the registered person's principal place of business is located. For example, in our Nagpur case, the complaint was filed before the Chief Judicial Magistrate, Nagpur. Pecuniary jurisdiction does not apply in criminal cases — any Magistrate can try the offence under Section 132, but the Chief Judicial Magistrate typically handles complex cases. Jurisdiction matters because improper forum can lead to dismissal or delay. If the department files in a far-away court, you must raise jurisdiction at the earliest.

What if Police Refuse to File FIR?

In GST cases, the department itself files a complaint before the Magistrate — an FIR under Section 173 BNSS is not the starting point. However, if you are the victim of a GST fraud (e.g., someone issued a fake invoice in your name), a police complaint may be necessary. If the police refuse to register an FIR:

• Step 1: Approach the Superintendent of Police (SP) under Section 173(4) BNSS with a written complaint explaining the refusal.
• Step 2: If the SP also refuses, file a private complaint under Section 175(3) BNSS before the Magistrate, who can direct the police to investigate.
• Step 3: As a last resort, file a writ petition before the High Court under Article 226 of the Constitution for a direction to register an FIR.

Rights of the Accused

An accused in a Section 132 GST trial has fundamental rights that must be protected:

• Right to remain silent: Under Article 20(3) of the Constitution — no person can be compelled to be a witness against themselves. Statements given to GST officers under compulsion are not admissible without caution.
• Right to legal representation: Under Article 22(1) — the accused has the right to consult and be defended by an advocate of their choice.
• Right to be produced within 24 hours: Under Article 22(2) — if arrested, the accused must be produced before a Magistrate within 24 hours of arrest, excluding travel time.
• Right to a copy of the complaint: The accused is entitled to a copy of the complaint and all documents relied upon by the prosecution before the trial begins.

Bail Provisions

Bail in GST offences depends on the amount of tax evasion:

• Bailable offences: Where tax evaded is less than Rs. 5 crore — bail is a matter of right under Section 480 BNSS. File a regular bail application before the Magistrate.
• Non-bailable offences: Where tax evaded is Rs. 5 crore or more — bail is at the discretion of the court under Section 483 BNSS. Anticipatory bail under Section 482 BNSS is available if there is apprehension of arrest.
• Bail conditions: Courts often impose conditions like furnishing a personal bond of Rs. 1-5 lakh, surrendering the passport, and reporting to the investigating officer weekly.
• Strategy: For non-bailable cases, apply for regular bail immediately after arrest. The Supreme Court has held that long pre-trial detention violates Article 21 — use that argument.

Quashing of FIR / Case

Quashing a GST complaint is a viable strategy where no prima facie offence is made out:

• Grounds for quashing: No intentional evasion; the transaction was genuine but procedural errors; the complaint is based solely on a statement made under duress; or the issue is purely civil (e.g., delayed payment, not fraud).
• Procedure: File a petition under Section 528 BNSS before the High Court. The High Court can quash the complaint if it finds the material does not disclose a criminal offence.
• When to use: Quashing is most effective when the department filed a complaint without proper investigation — like our Nagpur case, where the supplier's registration was valid and payment was made through banking channels.

If You Are the Victim

Being a victim of GST fraud (fake invoices issued in your name) is stressful. Here is what to do:

• Step 1: File a police complaint at the local police station with copies of the fake invoices and proof of your non-involvement.
• Step 2: Write to the GST department's investigation wing informing them that your GST number was misused — attach a copy of the complaint.
• Step 3: Keep all records — bank statements showing you never paid the tax, purchase orders you never placed, and any correspondence with the fake supplier.
• Step 4: Seek interim protection — you can approach the High Court for a stay on any recovery proceeding against you.

Documents You Must Keep Ready

For any Section 132 GST matter, have these documents ready before your advocate asks for them:

• GST registration certificate of your business.
• Copies of GSTR-1, GSTR-3B, and GSTR-2A returns for the relevant period.
• All purchase invoices and corresponding bank statements showing payment to suppliers.
• Supplier's GST registration certificate (if available) from the GST portal.
• Any show-cause notice or summons received from the department.
• Identity proof (Aadhaar, PAN) of the director/proprietor.
• Communication with the supplier — emails, WhatsApp chats, or delivery challans.

What Evidence Is Required?

In a GST criminal trial, both the prosecution and defence rely on documentary evidence primarily:

• Primary evidence: Original invoices, e-way bills, delivery challans, and bank statements showing payment. These are key to prove whether a genuine transaction occurred.
• Secondary evidence: Statements recorded by GST officers under Section 70 of the CGST Act — but only if given voluntarily and not under threat.
• Digital evidence: GST portal screenshots showing return filing status — these are admissible under the Evidence Act if certified.
• Expert opinion: A chartered accountant's report on the genuineness of transactions can be crucial to rebut the presumption under Section 135.
• Circumstantial evidence: The pattern of trade — if the client regularly dealt with that supplier for years, it suggests no sudden fraudulent scheme.

How the Police Behave in Such Cases

In GST matters, it is the GST department's investigation wing (not the local police) that usually handles the case. However, if an arrest is made, the police may be involved for custody. Here is typical behaviour: The investigating officer will first issue a summons under Section 70 of the CGST Act. If you do not cooperate, a complaint is filed. The department tends to treat all ITC mismatches as fraud — they often ignore bona fide errors. If your case involves multiple states, expect the DGGI to push for arrest even for smaller amounts. Always demand a copy of the investigation report before agreeing to any statement.

Timeline of Legal Process

Here is a realistic step-by-step timeline for a Section 132 GST trial:

• Step 1: Investigation (2-6 months) — GST officers gather invoices, bank statements, and record statements. They may issue a summons.
• Step 2: Show-cause notice (1 month) — Department issues a notice under Section 73 or 74 of the CGST Act proposing demand.
• Step 3: Complaint filing (1-2 months after SCN) — If the notice is not complied with, a criminal complaint is filed before the Magistrate.
• Step 4: Cognizance and summons (1-2 months) — The Magistrate takes cognizance and issues process to the accused.
• Step 5: Framing of charges (2-4 months) — After hearing both sides, the Magistrate frames charges under Section 132.
• Step 6: Trial (6-12 months) — Prosecution leads evidence, defence cross-examines, and then defence evidence. Total 1-2 years from complaint to judgment.
• Step 7: Appeal (6-12 months) — Either side can appeal to the Sessions Court or High Court against the verdict.

How Long Will the Investigation Take?

The GST department's investigation typically takes 2 to 6 months. For straightforward cases — like a single invoice mismatch — it may be quicker. For multi-state fraud cases involving dozens of entities, the investigation can stretch to a year. The department usually files the complaint within 60 days of the show-cause notice if the demand is not paid. If you cooperate and provide documents promptly, it can shorten the timeline.

Understanding the Costs

The total cost of a matter like this varies significantly from one case to the next — it depends on the complexity of the dispute, the forum involved, the number of hearings, and the specific facts of your situation. There is no single fixed figure that applies to everyone.

A professional advocate can give you an accurate estimate only after reviewing all your facts and documents in a consultation.

Can the Matter Be Settled Out of Court?

Absolutely. The CGST Act specifically provides for compounding of offences under Section 138. This means you can settle the criminal case by paying the tax, interest, and a compounding fee (usually up to 1.5 times the tax evaded). Compounding is available before the charge-sheet is filed or even during trial — but not after conviction. Alternatively, you can approach the GST department for a settlement under the amnesty schemes (if any are in effect) or file for mediation if the dispute involves a genuine interpretive difference. Compounding is advisable when the tax amount is small and you want to avoid the stigma of a criminal record. However, for large amounts, fighting the case may be more strategic.

Common Mistakes People Make

Fellow advocates and litigants often make these errors in GST trials:

• Delaying the first response: Not responding to the show-cause notice within the 30-day period. This makes the department think you have no defence.
• Engaging a general criminal lawyer: A lawyer who does not regularly handle GST cases will miss procedural nuances like the presumption under Section 135 or the compounding window under Section 138. That can weaken the entire defence.
• Destroying records: Some clients panic and destroy invoices or bank statements. That is fatal — it can be treated as evidence of guilt.
• Speaking to the department without counsel: Giving voluntary statements under Section 70 without an advocate present can lead to self-incrimination.
• Ignoring the civil liability: Clients think only the criminal case matters. But the department can also file a recovery proceeding — address both simultaneously.
• Failing to check the supplier's track record: The department always checks the supplier's returns. If you did not, it looks like negligence — use the supplier's registration status as your defence.

FAQs People Normally Have

Can I be arrested for a GST offence involving less than Rs. 1 crore?

Maybe not. Under Section 132, offences where the tax evaded is less than Rs. 5 crore are bailable and non-cognizable — meaning the department cannot arrest you without a warrant. However, they can still file a complaint. If you cooperate, an arrest is unlikely.

What if the supplier gave me a genuine invoice but later defaulted?

That is your strongest defence. You must show the transaction was genuine at the time — the supplier's registration was active, goods were physically delivered (e-way bill, delivery challan), and you paid through banking channels. The department cannot punish you for the supplier's subsequent default.

Can I compound the offence after the trial has started?

Yes, under Section 138, compounding is allowed at any stage before the pronouncement of judgment. But the department may refuse if the offence is repeated or involves widespread tax evasion. The compounding fee is typically 50% to 150% of the tax evaded.

How long will the trial take?

From complaint to judgment, expect 1 to 2 years. If the case is simple — fewer than 10 witnesses — it can be faster. Appeals add another 6 to 12 months. The key to speed is to not delay the framing of charges.

Can the High Court quash the complaint?

Yes, under Section 528 BNSS, if the complaint does not disclose an offence or is an abuse of process. For example, if the department filed a complaint based solely on a supplier's statement that you never met, the High Court can quash it.

This article is general legal information, not legal advice. Consult a qualified advocate about your specific situation.

Advocate Sudhir Rao, Supreme Court of India