Section 137 – Offences by Companies

Section 137 deals with situations where a company commits an offence under the CGST Act. Since a company is an artificial legal entity, the law identifies the individuals who can be held responsible for the offence.

The section states that every person who was in charge of and responsible for the conduct of the company's business at the time of the offence may be deemed guilty and proceeded against. This typically includes directors, managing directors, partners, managers, company secretaries, and other responsible officials.

However, such persons can avoid liability if they prove that the offence was committed without their knowledge or that they exercised due diligence to prevent it. Additionally, if it is proved that the offence occurred with the consent, connivance, or negligence of a director, manager, secretary, or other officer, that individual may also be prosecuted.

The objective is to prevent corporate entities from escaping responsibility by hiding behind their separate legal identity. It promotes accountability among management personnel and encourages strong internal compliance systems.

Example:
A company issues fake invoices and claims fraudulent ITC. The company as well as the directors responsible for its operations may face prosecution under GST laws.

Key Point:
Responsible company officials may be personally liable for GST offences committed by the company.

In One Line:
Both the company and its responsible officers can be prosecuted for GST violations.