Personal penalty under GST requires statutory ingredients and cannot be imposed retrospectively for pre-commencement conduct.

Section 122(1A) of the CGST Act was analysed as a penal provision linked to a taxable person who retains the benefit of the prohibited transaction and at whose instance it is carried out. On that reading, employees and office-bearers who were not shown to have personally retained such benefit could not be penalised under that provision. The text also states that Section 122(1A), inserted from 1 January 2021, cannot be applied to alleged conduct in earlier periods because retrospective imposition of penalty is barred by Article 20(1) of the Constitution. The impugned notices and personal penalties were therefore treated as without jurisdiction.

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Issues: (i) Whether penalty under Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be imposed on employees of the company who were not taxable persons in their individual capacity; (ii) Whether Section 122(1A) could be applied retrospectively to periods prior to its commencement so as to sustain the penalty for the earlier part of the demand period.

Issue (i): Whether penalty under Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be imposed on employees of the company who were not taxable persons in their individual capacity.

Analysis: Section 122(1) fastens penalty on a taxable person for specified offences. Section 122(1A) operates only where a person retains the benefit of a transaction covered by clauses (i), (ii), (vii) or (ix) of sub-section (1) and at whose instance such transaction is conducted. The expression "any person" in sub-section (1A) was read in the context of the statutory scheme, which links the provision to a taxable person and to the defined misconduct connected with the taxable person's transactions. The record did not show any finding that the petitioners, who were employees and office-bearers of the company, personally retained the benefit of the transactions or that the jurisdictional ingredients of Section 122(1A) were satisfied against them. The prior decision on identical statutory language was treated as applicable.

Conclusion: The penalty under Section 122(1A) could not validly be imposed on the petitioners and the impugned order was without jurisdiction.

Issue (ii): Whether Section 122(1A) could be applied retrospectively to periods prior to its commencement so as to sustain the penalty for the earlier part of the demand period.

Analysis: Section 122(1A) was inserted with effect from 1 January 2021, whereas the notice and order covered a period commencing from July 2017. A penal provision cannot be applied to acts committed before the provision came into force. Article 20(1) of the Constitution of India prohibits conviction or penalty for violation of a law not in force at the time of the alleged act and bars imposition of a greater penalty than that permissible under the law then in force. The attempted application of Section 122(1A) to the pre-1 January 2021 period was therefore impermissible.

Conclusion: Retrospective invocation of Section 122(1A) was invalid and the penalty for the prior period could not be sustained.

Final Conclusion: The impugned show cause notices and order-in-original, insofar as they fastened personal penalties on the petitioners, were held to be unlawful and without jurisdiction, and the writ petition succeeded.

Ratio Decidendi: A penalty under Section 122(1A) can be imposed only where the statutory ingredients are satisfied against a taxable person who retains the benefit of the prohibited transaction and at whose instance it was conducted, and the provision cannot be applied retrospectively to punish conduct occurring before its commencement.

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