Section 135 at a Glance
Contents
1. Statutory Text of Section 135
In any prosecution for an offence under this Act which 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,—
(i) the expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact;
(ii) 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.
Section 135 is an evidentiary provision within the GST prosecution framework. It becomes relevant when the offence being prosecuted requires a culpable mental state.
2. Section 135 Explained in Simple Language
Some offences can be committed simply by doing a prohibited act. Other offences contain an additional mental element: for example, the person must have intended something, known something, believed something or had reason to believe something.
Section 135 deals with the second category.
For an offence under the CGST Act that requires a culpable mental state, the section creates a statutory presumption that the required mental state existed. The accused is then given an express defence: the accused can prove that the required mental state did not exist with respect to the act charged.
This is why the exact wording of the offence provision must always be read first.
3. What Is a “Culpable Mental State”?
The Explanation to Section 135 gives a specific statutory meaning. It includes:
| Element | Plain-language meaning | Simple illustration |
|---|---|---|
| Intention | What the person meant or intended to do. | Deliberately issuing an invoice without a real supply to generate wrongful ITC. |
| Motive | The reason or purpose behind the conduct. | Taking a particular action to obtain an unlawful tax benefit. |
| Knowledge of a fact | Awareness that a relevant fact exists. | Knowing that a purported supplier did not actually make the claimed supply. |
| Belief in a fact | The person's belief about the existence of a fact. | Believing that goods are liable to confiscation based on known circumstances. |
| Reason to believe | Circumstances providing a basis for the relevant belief. | Transaction facts that would give a person reason to believe a document is not genuine. |
These concepts are related but not identical. The exact mental element required depends on the offence being prosecuted.
4. The Four Main Mental-State Concepts in Detail
4.1 Intention
Intention concerns what the accused meant to accomplish through the conduct. In a tax prosecution, the question may be whether a particular action was deliberate rather than an accidental consequence of an accounting or operational error.
For example, repeatedly creating invoices without corresponding supplies with the purpose of generating wrongful ITC is materially different from a genuine invoice containing a typographical mistake.
4.2 Motive
Motive asks why a person may have acted in a particular way. Motive and intention are not identical. A person may have a particular motive, but the prosecution still has to address the mental element required by the specific offence.
4.3 Knowledge
Knowledge concerns awareness of a fact. Where an offence uses knowledge as part of its ingredients, evidence may be relevant to whether the person actually knew the relevant circumstances.
4.4 Belief or reason to believe
Some GST provisions use expressions such as “knows” or “has reason to believe.” Section 135 specifically includes belief in, or reason to believe, a fact within culpable mental state.
5. How the Section 135 Presumption Works
The wording of Section 135 contains a two-part structure:
- Where the prosecution concerns an offence that requires a culpable mental state, the court shall presume the existence of that mental state.
- The accused can defend the prosecution by proving that the required mental state did not exist with respect to the act charged.
This means the statute establishes a specific evidentiary presumption. It should not be simplified into the statement that “the accused is automatically guilty.” A presumption about a mental state is not itself a conviction.
6. What Defence Is Available to the Accused?
The section expressly states that it is a defence for the accused to prove that the accused had no such mental state with respect to the act charged.
Therefore, in a prosecution where Section 135 applies, the accused may place evidence before the court showing, for example, that the relevant conduct resulted from a genuine error, lack of knowledge, absence of the required intention, or other circumstances inconsistent with the mental state required by the offence.
Possible categories of evidence
- Contemporaneous business correspondence.
- Purchase orders and contracts.
- Invoices and supporting documents.
- Bank payment trails.
- Goods receipt and dispatch records.
- Inventory records.
- ERP audit trails.
- Approval records and delegated authority.
- Employee instructions and training records.
- Reconciliation workings.
- Corrective entries and voluntary corrections.
- Evidence showing the commercial substance of a transaction.
The relevance of each item depends on the offence and facts. There is no universal document that disproves culpable mental state in every case.
7. “Beyond Reasonable Doubt” vs “Preponderance of Probability”
Section 135's second Explanation is particularly important. It says that a fact is said to be proved only when the court believes it to exist beyond reasonable doubt, and not merely when it is established by a preponderance of probability.
| Standard | Simple meaning | Section 135 relevance |
|---|---|---|
| Beyond reasonable doubt | A high criminal-law standard requiring the court to be satisfied to the required degree that the fact exists. | Section 135 expressly uses this standard in its Explanation. |
| Preponderance of probability | Broadly, one proposition appears more likely than the other. | Section 135 says this lower standard alone is not enough for a fact to be “proved” for the purpose of its Explanation. |
This distinction is important because tax proceedings and criminal proceedings can involve different legal questions and evidentiary standards. A conclusion reached in an administrative or tax proceeding should not automatically be described as a criminal conviction.
8. Section 135 and “Mens Rea”
“Mens rea” is a commonly used legal expression for a guilty or culpable mental state. Section 135 uses the statutory phrase “culpable mental state” and then defines it for the purposes of the section.
CBIC's GST FAQ has also explained that where a GST offence requires a culpable mental state, Section 135 creates a presumption of that state, while allowing the accused to establish that the required mental state did not exist. citeturn0search22
Why the distinction matters
A GST prosecution should not be analysed only by looking at the transaction amount. Where the offence requires intention, fraud, knowledge, belief or reason to believe, the mental-state requirement can be a significant part of the case.
For finance teams, this is one reason why a clean audit trail and evidence of genuine commercial conduct can be important when a transaction is later questioned.
9. What Evidence May Be Relevant to Culpable Mental State?
| Evidence area | Questions it may help address |
|---|---|
| Contracts | Was there a genuine commercial arrangement? |
| Invoices | Was the transaction documented consistently? |
| Purchase orders | Was there a business requirement for the transaction? |
| Goods receipt records | Did goods actually enter the business? |
| E-way bills/transport records | Was movement consistent with the transaction? |
| Bank statements | Were payments made through the stated commercial channels? |
| ERP audit trail | Who created or changed accounting records? |
| Email/communication | What did the relevant people know or intend at the time? |
| GST reconciliation | Was a mismatch identified and investigated? |
| Corrective action | Did the taxpayer voluntarily identify and correct an error? |
10. Practical Examples
An accountant enters an incorrect digit in an invoice number. The underlying purchase is genuine, goods are received, payment is made through banking channels and the error is corrected. If an offence requires a culpable mental state, these facts may be relevant to the defence that the required mental state did not exist.
A person creates invoices for supplies that never occurred and uses them to generate wrongful ITC. Internal communications show that the purpose was to create artificial credit. These facts may be relevant to intention, knowledge and motive.
An employee independently manipulates a record without the knowledge of management. The company's systems show that the employee did not have authority for the change. The question of who knew what, who authorised what and who intended the conduct becomes important.
A supplier's GST return does not match the recipient's purchase register. A mismatch alone does not establish that the recipient knowingly participated in a fraudulent arrangement. The underlying transaction, documents and circumstances need examination.
A person purchases goods despite documentary and commercial circumstances strongly indicating that the goods are liable to confiscation. Where the relevant offence requires knowledge or reason to believe, those surrounding facts can become relevant.
A business collects GST from customers and deliberately diverts the collected amount while knowing that the statutory payment obligation has arisen. The knowledge and circumstances surrounding the non-payment can become relevant in a prosecution under the applicable offence provision.
A company discovers a genuine reporting error before any enforcement action, corrects the records and pays the applicable amount. Those facts may be relevant to assessing the circumstances, although their legal effect depends on the specific offence and applicable provisions.
A company issues invoices with no corresponding supply and records show that the parties planned the arrangement to generate wrongful ITC. The documentary trail may be relevant to the required mental state.
A buyer and supplier disagree about the quantity or quality of goods. A commercial dispute by itself should not automatically be described as proof of a culpable mental state. The specific offence and evidence must be considered.
An employee has access to an ERP system and changes a GST-related ledger. The existence of the login alone does not necessarily establish intention. Audit logs, instructions, timing, approvals and surrounding communications may be relevant.
11. Section 135 in Company GST Prosecution
Where a company is involved, Section 135 should be read with Section 137, which deals with offences by companies.
One important practical issue is identifying the mental state of the particular person whose conduct is being examined. A company prosecution and an individual's liability can involve different factual questions.
| Question | Why it matters |
|---|---|
| Who performed the act? | Identifies the conduct and relevant decision-maker. |
| Who authorised it? | May help establish responsibility and surrounding circumstances. |
| Who knew the relevant facts? | Important where the offence requires knowledge. |
| What did the company procedures require? | Shows expected controls and responsibilities. |
| Were controls bypassed? | May be relevant to understanding how the transaction occurred. |
| Was there an audit trail? | Can help reconstruct events. |
12. Section 135 Does Not Mean “Every GST Error Is Presumed Fraudulent”
This is one of the most important public-facing explanations of the section.
Section 135 applies to an offence under the CGST Act which requires a culpable mental state. It does not convert every GST mismatch, late filing, classification dispute or accounting mistake into a criminal offence.
| Situation | Section 135 analysis |
|---|---|
| Simple clerical mistake | First ask whether the alleged offence actually requires a culpable mental state. If it does, evidence concerning absence of that state may be relevant. |
| Genuine commercial transaction with reconciliation mismatch | Mismatch alone should not automatically be treated as proof of criminal intent. |
| Deliberate fake invoices | Intention/knowledge can be central depending on the offence charged. |
| Knowingly dealing with goods liable to confiscation | Knowledge or reason to believe may be expressly relevant to the offence. |
| Falsifying records to evade tax | Intention to evade tax is expressly relevant to Section 132(f). |
14. Common Misunderstandings
“Section 135 means the accused is automatically guilty.”
No. It creates a statutory presumption regarding culpable mental state in prosecutions to which the section applies. It does not itself amount to a conviction.
“Every GST offence has a culpable mental state.”
No. Section 135 applies where the offence under the Act requires a culpable mental state. The wording of the particular offence must be examined.
“Culpable mental state only means intention.”
No. The Explanation expressly includes intention, motive, knowledge of a fact, and belief in or reason to believe a fact.
“Reason to believe means proof of actual knowledge in every case.”
Not necessarily. “Reason to believe” and “knowledge” are distinct expressions. Their application depends on the wording of the relevant offence and the facts.
“A tax department finding automatically proves the criminal case.”
No. Administrative/tax proceedings and criminal prosecution can involve different legal questions and evidentiary standards.
“A probability is enough to prove a fact under Section 135.”
Section 135's Explanation expressly states that a fact is said to be proved when the court believes it beyond reasonable doubt, not merely on a preponderance of probability.
“Only written documents matter for mental state.”
No. Depending on admissibility and the facts, communications, conduct, system records, transaction patterns and other evidence can be relevant.
15. Practical Investigation & Defence Checklist
- Identify the exact offence charged.
- Read the offence provision and identify whether it requires intention, fraud, knowledge, belief or reason to believe.
- Identify the person whose mental state is relevant.
- Prepare a transaction chronology.
- Collect source documents and commercial records.
- Preserve ERP audit trails and system access records.
- Review emails, approvals and instructions where legally appropriate.
- Separate genuine errors from evidence suggesting deliberate conduct.
- Document corrective action and the timing of any correction.
- Do not assume a reconciliation mismatch proves fraudulent intent.
- Review the Section 135 presumption and the statutory defence available to the accused.
- Obtain qualified legal advice for an actual prosecution.
16. SEO Questions People Commonly Search
- What is Section 135 of the CGST Act?
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- Section 135 vs Section 132 CGST Act?
17. Frequently Asked Questions
1. What is Section 135 of the CGST Act?
It is the provision dealing with the presumption of culpable mental state in a prosecution for a GST offence that requires such a mental state.
2. What is culpable mental state?
The Explanation includes intention, motive, knowledge of a fact, and belief in or reason to believe a fact.
3. Does Section 135 apply to every GST offence?
No. It applies to a prosecution for an offence under the CGST Act that requires a culpable mental state.
4. What does the court presume?
Where Section 135 applies, the court shall presume the existence of the required culpable mental state.
5. Can the accused challenge the presumption?
Yes. Section 135 expressly provides that it is a defence for the accused to prove that the required mental state did not exist with respect to the act charged.
6. Does the accused have to prove innocence in every respect?
Section 135 specifically concerns the required culpable mental state. It should not be read as saying that every element of every criminal offence is automatically proved by the presumption.
7. What does “beyond reasonable doubt” mean in Section 135?
The section's Explanation says a fact is proved only when the court believes it to exist beyond reasonable doubt, not merely on a preponderance of probability.
8. Is mens rea the same as culpable mental state?
“Mens rea” is a commonly used legal expression for a guilty or culpable mental state. Section 135 uses the statutory term and expressly defines what it includes for the section.
9. Can a genuine accounting mistake become Section 135 evidence?
If the alleged offence requires a culpable mental state, evidence showing that the event was a genuine mistake may be relevant to the defence. The actual legal effect depends on the offence and evidence.
10. Does a GSTR-2B mismatch prove fraudulent ITC?
No. A mismatch is a compliance exception and can have multiple causes. Whether a criminal offence occurred requires analysis of the statutory ingredients and evidence.
11. What is the difference between intention and motive?
Intention concerns what a person meant to do; motive concerns the reason or purpose behind conduct. Section 135 expressly includes both within culpable mental state.
12. What is the difference between knowledge and reason to believe?
Knowledge concerns awareness of a fact, while “reason to believe” focuses on circumstances providing a basis for the relevant belief. The exact meaning in a prosecution depends on the wording of the offence and facts.
13. Can ERP audit trails be useful in a Section 135 matter?
They can be relevant because they may show who created, changed or approved records and when. Their evidentiary value depends on the facts and applicable law.
14. How does Section 135 connect with Section 137?
Section 135 concerns culpable mental state; Section 137 deals with offences by companies and responsible persons. Both can become relevant in a company prosecution.
15. How does Section 135 connect with Section 134?
Section 134 concerns Commissioner sanction before cognizance and the minimum court level for trial. Section 135 concerns the presumption of culpable mental state in applicable prosecutions.
16. Does Section 135 create a new offence?
No. It is an evidentiary/procedural provision concerning mental state in prosecutions for offences already created by the Act.
18. Quick Revision – Section 135
- Section 135 = Presumption of culpable mental state.
- Applies in prosecution for an offence that requires culpable mental state.
- The court shall presume the existence of the required mental state.
- The accused can defend the case by proving that the required mental state did not exist regarding the act charged.
- Culpable mental state includes intention, motive, knowledge of a fact, belief in a fact, and reason to believe a fact.
- The Explanation says a fact is proved when the court believes it beyond reasonable doubt, not merely on a preponderance of probability.
- Section 135 does not itself create an offence.
- It does not mean every GST mismatch is criminal.
- The exact offence provision must be examined to identify the required mental element.
- Sections 132, 134, 136, 137 and 138 should be read with Section 135 when analysing a GST prosecution.
19. Legal Disclaimer
This page is provided for general educational and compliance-workflow purposes. GST law, rules, notifications, circulars, instructions, criminal-procedure law and judicial interpretation can change, and the legal position can depend on the facts, date, jurisdiction and exact proceeding. Before taking a tax, accounting, litigation or criminal-law decision, verify the law applicable to the relevant period and obtain professional advice where appropriate. This page is not a substitute for professional legal advice.