Penal liability under Section 122(1A) limited to taxable persons retaining benefit; not retrospective for acts prior to commencement.

Section 122(1A) was interpreted as confined to persons who, in statutory terms, qualify as taxable persons and who retained the benefit of the specified transactions or on whose instance those transactions were conducted; absent material establishing those jurisdictional preconditions, penalties under Section 122(1A) cannot be sustained against company employees or officers. Separately, Article 20(1) bars imposition of penal liability under a provision that was not in force when the acts were committed, so Section 122(1A) cannot be applied retrospectively to acts before its commencement.

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Issues: (i) Whether penalties under Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be validly imposed on the petitioners who are employees/officers of the company; (ii) Whether Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be applied retrospectively for acts committed prior to its coming into force on 1 January 2021.

Issue (i): Whether penalties under Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be validly imposed on the petitioners who are employees/officers of the company.

Analysis: Section 122(1) applies to a "taxable person" as defined by Section 2(107). Section 122(1A) imposes liability on "any person who retains the benefit" of certain transactions and "at whose instance such transaction is conducted"; those sub-section (1) clauses referenced (i), (ii), (vii) and (ix) concern acts of a taxable person. The term "person" in sub-section (1A) must be read in the context of sub-section (1) and the statutory definitions in Section 2(84) and Section 2(107). Absent material showing that the petitioners were taxable persons or retained the benefit of the transactions or that transactions were conducted at their instance, the jurisdictional preconditions of Section 122(1A) are not satisfied.

Conclusion: The imposition of penalties under Section 122(1A) on the petitioners, who are employees/officers of the company, is not sustainable; decision is in favour of the petitioners.

Issue (ii): Whether Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be applied retrospectively for acts committed prior to its coming into force on 1 January 2021.

Analysis: Article 20(1) of the Constitution of India bars conviction or imposition of a penalty under a law that was not in force at the time of the commission of the act charged. Section 122(1A) was inserted effective 1 January 2021. The show cause notices covered periods before that date. Penal liability under Section 122(1A) cannot be retroactively imposed for acts committed prior to its commencement.

Conclusion: Section 122(1A) cannot be applied retrospectively to penalise acts prior to 1 January 2021; decision is in favour of the petitioners.

Final Conclusion: The writ petition is allowed insofar as the impugned show cause notices and the Order-in-Original imposing penalties under Section 122(1A) of the Central Goods and Services Tax Act, 2017 upon the petitioners are concerned; those notices and the order as applied to the petitioners are quashed for want of jurisdiction and for retrospective application of the penal provision.

Ratio Decidendi: Section 122(1A) of the Central Goods and Services Tax Act, 2017 is confined to persons who, in the statutory sense, are taxable persons who retain the benefit of the specified transactions and at whose instance such transactions are conducted, and the provision cannot be applied retrospectively to penalise acts committed before it came into force on 1 January 2021.

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