Section 135 of the Central Goods and Services Tax Act, 2017 deals with the presumption of culpable mental state in GST prosecutions.
The provision becomes relevant when a person is prosecuted for an offence under the CGST Act and that particular offence requires a culpable mental state on the part of the accused. In such a case, the court is required to presume that the required mental state existed. However, the accused is given an opportunity to establish that he or she did not have the required mental state in relation to the act charged as an offence.
Section 135 is therefore an important provision in the offences and penalties framework under Chapter XIX of the CGST Act. It deals specifically with the mental element required for certain criminal offences and establishes a statutory presumption that can be rebutted by the accused.
The section also explains what is meant by “culpable mental state”. It includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact. It further provides a specific standard for proving a fact: the court must believe that the fact exists beyond reasonable doubt, rather than merely on the basis of a preponderance of probability.
What Is Section 135 of the CGST Act?
Section 135 is titled “Presumption of culpable mental state.”
The provision applies in a prosecution for an offence under the CGST Act which requires a culpable mental state on the part of the accused.
Its basic structure is:
- The court presumes the existence of the required culpable mental state.
- The accused can defend himself or herself by proving that the required mental state did not exist.
- “Culpable mental state” includes intention, motive, knowledge and certain forms of belief or reason to believe.
- A fact is treated as proved under the explanation only when the court believes it exists beyond reasonable doubt, rather than merely on a preponderance of probability.
This makes Section 135 different from provisions that merely prescribe a tax liability, interest or civil penalty.
Why Is Section 135 Important?
GST law contains both tax-administration provisions and criminal offence provisions.
A tax demand or penalty proceeding does not automatically mean that a person has committed a criminal offence. Criminal prosecution under the CGST Act is governed by the provisions relating to offences and prosecution, particularly Chapter XIX.
Where a prosecution concerns an offence that requires a particular mental state, Section 135 establishes a statutory presumption regarding that mental state.
For example, certain offences may involve conduct where intention, knowledge or a reason to believe is relevant. In such cases, Section 135 becomes important because it determines how the mental element is treated during prosecution.
The section does not itself create a new GST offence. Instead, it provides an evidentiary rule for prosecutions involving offences that require a culpable mental state.
Meaning of Culpable Mental State
Section 135 itself explains the expression “culpable mental state.”
It includes:
- intention;
- motive;
- knowledge of a fact;
- belief in a fact; and
- reason to believe a fact.
Therefore, the concept is concerned with what was in the mind of the accused in relation to the act charged as an offence.
The precise mental element required will depend on the particular offence for which the person is being prosecuted.
Intention
Intention refers to the state of mind concerning the act that was allegedly committed.
For example, where the relevant offence requires that an act be done deliberately, the issue of intention may become important.
Motive
Motive refers to the reason or purpose behind an act.
For example, the prosecution may rely on circumstances suggesting that an act was undertaken for a particular purpose.
Knowledge
Knowledge concerns awareness of a relevant fact.
For example, where an offence requires knowledge of a particular circumstance, the question may arise whether the accused knew that fact at the relevant time.
Belief or Reason to Believe
Section 135 also includes belief in, or reason to believe, a fact.
This means that the statutory concept of culpable mental state is not limited to actual intention. It also covers specified forms of knowledge and belief concerning relevant facts.
Section 135 Creates a Rebuttable Presumption
The most important feature of Section 135 is that the presumption is not absolute.
The court shall presume the existence of the culpable mental state where the offence requires such a mental state.
However, the section expressly provides that it is a defence for the accused to prove that he or she did not have such mental state with respect to the act charged as an offence.
Therefore, the provision creates a rebuttable presumption.
In simplified terms:
Prosecution for an offence requiring culpable mental state → statutory presumption applies → accused may establish absence of the required mental state.
This is different from saying that the accused is automatically guilty.
Does Section 135 Mean That the Accused Is Presumed Guilty?
No.
Section 135 concerns the presumption of a culpable mental state, not a blanket presumption that the accused committed the offence.
The prosecution still concerns the offence charged under the CGST Act and the applicable legal requirements.
The statutory presumption specifically operates where the offence requires a culpable mental state.
Therefore, Section 135 should not be interpreted as saying that merely because a prosecution has been initiated, every element of the offence is automatically established.
The provision deals specifically with the mental-state requirement identified in the relevant offence.
Section 135 Applies Only Where the Offence Requires Culpable Mental State
This limitation is important.
Section 135 begins with the words:
“In any prosecution for an offence under this Act which requires a culpable mental state…”
Therefore, the provision is connected to offences for which such a mental state is legally relevant.
It does not state that every offence under the CGST Act automatically requires proof of intention, motive or knowledge.
The wording of the particular offence must therefore be considered.
This distinction is important because GST law contains numerous provisions dealing with tax, registration, invoices, records, fraudulent conduct, prosecution and other matters, and the legal requirements are not identical for every provision.
Section 135 and Section 132
Section 132 is the principal provision dealing with punishment for certain offences under the CGST Act.
It identifies various acts that can constitute offences and prescribes criminal punishment subject to the statutory conditions.
Section 135 operates in the prosecution framework where an offence requires a culpable mental state.
The relationship can be understood broadly as follows:
Section 132 → Specifies certain GST offences and punishments
Section 135 → Provides a rule concerning culpable mental state in a prosecution where such mental state is required
The two provisions should therefore be read together when considering criminal prosecution under the CGST Act.
Section 135 and Section 134
Section 134 deals with cognizance of offences.
It provides that no court shall take cognizance of an offence punishable under the CGST Act or the rules made thereunder except with the previous sanction of the Commissioner. It also provides that no court inferior to that of a Magistrate of the First Class shall try such an offence.
Section 135 is different.
| Provision | Main subject |
|---|---|
| Section 132 | Punishment for specified offences |
| Section 134 | Cognizance of offences |
| Section 135 | Presumption of culpable mental state |
| Section 136 | Relevancy of certain statements |
| Section 137 | Offences by companies |
| Section 138 | Compounding of offences |
These provisions form part of the broader criminal-prosecution framework under Chapter XIX.
Section 135 and Section 136
Section 136 deals with the relevancy of statements under certain circumstances.
It provides circumstances in which a statement made and signed by a person appearing in response to a summons under Section 70 may be relevant for proving the truth of the facts contained in that statement in a prosecution for an offence under the CGST Act.
Section 135 and Section 136 therefore address different evidentiary issues.
Section 135
Deals with the presumption of culpable mental state.
Section 136
Deals with the relevancy of specified statements made in response to summons.
Both can become relevant in a prosecution, but they serve different purposes.
Section 135 and Section 137
Section 137 deals with offences by companies.
It provides rules concerning when a company and persons responsible for the conduct of its business may be proceeded against for offences under the CGST Act. It also provides a defence where a person proves that the offence was committed without their knowledge or that they exercised due diligence to prevent its commission.
Section 135 is different because it concerns the presumption of culpable mental state in a prosecution.
The provisions may nevertheless become relevant in the same overall criminal-prosecution framework.
Section 135 Does Not Create a Tax Demand
Section 135 is not a provision for determining:
- output tax;
- input tax credit;
- interest;
- late fee;
- ordinary tax demand; or
- refund.
It operates in the context of criminal prosecution for an offence.
A GST officer determining a tax liability under the applicable demand provisions is dealing with a different legal process from a criminal prosecution before a court.
Therefore, Section 135 should not be confused with Sections 73, 74 or 74A, which deal with determination of specified tax liabilities.
Criminal Prosecution and Tax Proceedings Are Different
GST law contains different mechanisms for dealing with tax disputes and offences.
For example:
- a tax may be determined through the applicable demand provisions;
- interest may become payable under Section 50;
- penalties may arise under applicable provisions;
- criminal prosecution may be initiated for specified offences under Chapter XIX.
Section 135 belongs to the criminal-prosecution side of this framework.
Therefore, the mere existence of a tax dispute does not by itself explain how Section 135 operates. The nature of the alleged offence and the prosecution must be considered.
Meaning of “Presume” Under Section 135
The word “presume” is central to the section.
The court is directed to presume the existence of the culpable mental state when the prosecution concerns an offence that requires such a mental state.
However, the accused is expressly permitted to establish that the required mental state did not exist.
This makes the statutory presumption rebuttable rather than conclusive.
Simple Illustration
Suppose a person is prosecuted for an offence for which the law requires a particular mental state.
Section 135 may require the court to presume that the required mental state existed.
The accused may then present evidence and circumstances intended to establish that the required mental state was absent.
The court must consider that defence according to the applicable law and evidence.
What Does the Accused Have to Establish?
Section 135 states that it is 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.
Thus, the defence is directed specifically at the mental state required for the offence.
For example, where the relevant offence requires knowledge of a fact, the accused may seek to establish that he did not possess that knowledge.
Where the relevant issue concerns intention, the accused may seek to establish the absence of the required intention.
The exact evidence required will depend on the offence and circumstances of the case.
Explanation (i) – Components of Culpable Mental State
Explanation (i) to Section 135 provides that the expression “culpable mental state” includes:
- intention;
- motive;
- knowledge of a fact; and
- belief in, or reason to believe, a fact.
This explanation is important because it defines the expression used in the main provision.
Without this explanation, the scope of “culpable mental state” could be less clear.
By specifically listing these elements, the section identifies the types of mental conditions covered by the statutory expression.
Explanation (ii) – Standard for Proving a Fact
Explanation (ii) contains another important rule.
It states that 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.
This language is particularly important because it expressly refers to the standard of proof in the context of the statutory explanation.
Beyond Reasonable Doubt
“Beyond reasonable doubt” is the traditionally recognised high standard applicable to criminal proceedings.
It requires the court to reach the required level of certainty based on the evidence before it.
Preponderance of Probability
A preponderance of probability is a lower standard generally associated with civil proceedings, where the question may be whether something is more likely than not.
Section 135’s Explanation (ii) specifically distinguishes the two.
Why Is Explanation (ii) Important?
The explanation prevents the expression “proved” in Section 135 from being understood merely in terms of which version appears more probable.
The statutory language expressly requires the court to believe the fact to exist beyond reasonable doubt.
This reinforces the criminal nature of the proceeding to which Section 135 applies.
Example – Knowledge of a Fact
Suppose a particular GST offence requires the accused to have knowledge of a specified fact.
During prosecution, the existence of that knowledge becomes an issue.
Under Section 135, where the offence requires a culpable mental state, the court presumes the existence of the required mental state.
The accused can defend himself by attempting to prove that he did not possess the relevant knowledge.
The court then evaluates the evidence under the applicable criminal-law standard.
Example – Intention
Suppose an offence requires a particular intention.
The prosecution alleges that the accused acted with that intention.
Section 135 provides the statutory presumption concerning culpable mental state.
The accused may attempt to establish that the required intention was absent.
Whether the defence succeeds depends on the evidence and the legal requirements of the particular offence.
Example – Belief or Reason to Believe
Suppose the relevant offence involves a fact that the accused allegedly believed, or had reason to believe.
The statutory definition of culpable mental state expressly includes belief in, or reason to believe, a fact.
Accordingly, Section 135 may become relevant to the manner in which that mental element is considered during prosecution.
Section 135 and Intentional Tax Evasion
Section 135 may become relevant in criminal cases involving conduct where the applicable offence requires a culpable mental state.
However, it is important not to treat every tax short-payment or GST discrepancy as automatically involving criminal intent.
GST compliance can involve:
- classification disputes;
- valuation issues;
- accounting errors;
- interpretation of notifications;
- documentation mistakes;
- input tax credit disputes; and
- other compliance issues.
Whether a particular matter amounts to a criminal offence depends on the applicable statutory provision and the facts of the case.
Section 135 operates only where the prosecution involves an offence requiring a culpable mental state.
Section 135 Does Not Remove the Right of Defence
Although Section 135 establishes a presumption, it expressly allows the accused to defend the case by establishing absence of the required mental state.
Therefore, the accused is not deprived of the opportunity to contest the mental element.
The statutory framework specifically recognises the defence that the accused did not possess the required culpable mental state in relation to the act charged.
Evidence Relevant to Mental State
The evidence relevant to mental state can vary significantly depending on the facts.
Depending on the case, relevant material may include:
- business records;
- contracts;
- invoices;
- correspondence;
- accounting records;
- internal communications;
- instructions given to employees;
- professional advice;
- transaction records;
- documents relating to the disputed activity; and
- statements or other legally admissible evidence.
The relevance and evidentiary value of particular material will depend on the facts and the applicable law.
Importance for Companies and Businesses
Section 135 has practical significance for businesses because GST transactions are often carried out through multiple employees, directors, managers, accountants and other professionals.
A business should therefore maintain proper compliance records showing:
- how transactions were reviewed;
- how GST treatment was determined;
- what documents were examined;
- what internal controls were followed;
- how invoices were verified;
- how input tax credit was reviewed; and
- what compliance procedures were followed.
Proper documentation does not automatically determine the outcome of a prosecution, but it can be important evidence regarding the circumstances in which an act occurred and the mental state of persons involved.
Section 135 and Due Diligence
Section 137(4) separately provides a defence for specified persons in company-related offences where they prove that the offence was committed without their knowledge or that they exercised all due diligence to prevent its commission.
This should not be confused with Section 135.
Section 135
Concerns the presumption of culpable mental state.
Section 137(4)
Provides a specific defence in the context of offences by companies and specified persons connected with them.
Both provisions may be relevant in a criminal GST matter, but they operate on different statutory bases.
Section 135 and Directors
Section 135 does not itself state that every director is presumed to possess culpable mental state.
Questions concerning the criminal liability of directors and other persons associated with a company are addressed under the relevant provisions, particularly Section 137.
Section 135 concerns the mental-state presumption where the offence itself requires a culpable mental state.
Therefore, liability should be examined under the applicable statutory provisions rather than assuming that a person’s designation alone establishes guilt.
Section 135 and Section 138 – Compounding
Section 138 deals with compounding of offences.
It provides a mechanism under which an offence under the CGST Act may, subject to statutory conditions and exclusions, be compounded on payment of the prescribed compounding amount.
Section 135 is different because it concerns the presumption of culpable mental state during prosecution.
Thus:
Section 135 → Evidentiary rule concerning mental state
Section 138 → Compounding of offences
Relationship With Section 134
Section 134 provides that a court cannot take cognizance of an offence punishable under the CGST Act or the rules made thereunder without the previous sanction of the Commissioner, and that no court below the level of a Magistrate of the First Class can try such an offence.
Section 135 becomes relevant after the matter falls within the prosecution framework and concerns an offence that requires a culpable mental state.
Relationship With Section 132
Section 132 specifies various GST offences and the punishments applicable to them.
Some offences involve conduct where the mental element is legally important.
Section 135 supplies the statutory presumption where the prosecution is for an offence that requires a culpable mental state.
The exact operation of the presumption therefore depends on the language and requirements of the offence being prosecuted.
Relationship With Section 136
Section 136 deals with the evidentiary relevance of certain statements made in response to summons under Section 70.
Section 135 deals with culpable mental state.
Both provisions occur in close proximity in Chapter XIX, but they address different questions.
| Provision | Subject |
|---|---|
| Section 134 | Cognizance of offences |
| Section 135 | Presumption of culpable mental state |
| Section 136 | Relevancy of certain statements |
| Section 137 | Offences by companies |
| Section 138 | Compounding of offences |
Practical Compliance Measures for Businesses
Businesses can reduce compliance risks by maintaining a documented GST compliance framework.
Useful measures include:
Maintain Accurate Books
Keep books of account and GST records complete and consistent.
Verify Tax Invoices
Review invoices for GSTIN, taxable value, tax amount, classification and other applicable particulars.
Review Input Tax Credit
Maintain documentation supporting the eligibility and business purpose of input tax credit.
Preserve Contracts
Keep agreements and supporting documents that explain the nature of transactions.
Maintain Approval Records
Where significant GST positions are taken, retain relevant internal approvals and professional advice.
Monitor GST Law
GST provisions, notifications and procedures can change. Compliance teams should monitor relevant amendments.
Train Employees
Employees involved in billing, procurement, accounts and GST compliance should understand the applicable procedures.
Maintain Audit Trails
Electronic systems should preserve appropriate records showing how transactions were processed and reviewed.
These measures do not determine criminal liability by themselves, but they can help establish the factual circumstances surrounding GST compliance activities.
Key Takeaways of Section 135
Section 135 can be understood through the following points:
- Section 135 deals with the presumption of culpable mental state.
- It applies in a prosecution for an offence under the CGST Act where the offence requires a culpable mental state.
- The court shall presume the existence of the required mental state.
- The presumption is rebuttable.
- The accused can defend the case by proving that the required mental state did not exist.
- Culpable mental state includes intention.
- It includes motive.
- It includes knowledge of a fact.
- It includes belief in a fact.
- It also includes reason to believe a fact.
- Section 135 does not itself create a GST offence.
- It operates as an evidentiary rule in the prosecution of relevant offences.
- It does not mean that every GST discrepancy automatically establishes criminal guilt.
- The particular offence must be examined to determine whether it requires a culpable mental state.
- Explanation (ii) states that a fact is proved only when the court believes it exists beyond reasonable doubt.
- The section distinguishes this standard from proof merely on a preponderance of probability.
- Section 135 should be read with the other provisions of Chapter XIX.
- Section 132 deals with specified GST offences and punishments.
- Section 134 deals with cognizance of offences.
- Section 136 deals with the relevancy of certain statements.
- Section 137 deals with offences by companies.
- Section 138 deals with compounding of offences.
👉 Read More → Section 135 – Presumption of culpable mental state
Conclusion
Section 135 of the CGST Act is an important provision dealing with the mental element in GST criminal prosecutions. It applies where an offence under the Act requires a culpable mental state on the part of the accused.
The section establishes a statutory presumption that the required culpable mental state existed. At the same time, it expressly allows the accused to defend the case by proving that the required mental state did not exist in relation to the act charged as an offence.
The Explanation to Section 135 gives the provision greater clarity by defining culpable mental state to include intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact. It also provides that a fact is considered proved only when the court believes it to exist beyond reasonable doubt, rather than merely on a preponderance of probability.
It is also important to understand what Section 135 does not do. It does not itself create an offence, determine a GST tax demand or automatically establish criminal guilt merely because a tax dispute or compliance discrepancy exists. Its operation depends on the particular offence for which prosecution is brought and whether that offence requires a culpable mental state.
Section 135 should therefore be read together with Sections 132 to 138, which collectively establish important aspects of the GST offence and prosecution framework. Understanding the distinction between tax proceedings, penalties and criminal prosecution is essential when analysing the effect of Section 135.
For businesses, maintaining accurate books, contracts, invoices, compliance records and internal controls can be important in demonstrating the factual circumstances surrounding GST transactions. However, the legal effect of such evidence depends on the facts of the individual prosecution and the applicable law.
In short, Section 135 creates a rebuttable presumption regarding culpable mental state in specified GST prosecutions, while preserving the accused’s ability to establish that the required mental state was absent.
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