CGST penalty liability extends to persons retaining transaction benefits and is not treated as retrospective here.

Section 122(1A) of the CGST Act is discussed as reaching not only the taxable person but also the person who retains the benefit of the prohibited transaction and at whose instance it is carried out. On the facts described, the partners were treated as falling within that scope because they retained the benefit and directed the transactions. The note also states that applying Section 122(1A) to conduct that began before 01.01.2021 is not treated as impermissible retrospectivity, because the provision is characterised as identifying the liable person for an existing penal scheme and was in force when proceedings were initiated.

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Issues: (i) Whether partners of a partnership firm, being persons other than the taxable person, can be proceeded against under Section 122(1A) of the Central Goods and Services Tax Act, 2017; (ii) Whether Section 122(1A) of the Central Goods and Services Tax Act, 2017 can be applied to transactions relating to the period prior to its commencement on 01.01.2021.

Issue (i): Whether partners of a partnership firm, being persons other than the taxable person, can be proceeded against under Section 122(1A) of the Central Goods and Services Tax Act, 2017.

Analysis: The expression "any person" in Section 122(1A) was construed in the light of the statutory definitions of "person", "taxable person" and "registered person". The provision was held to be targeted not merely at the taxable person, but at the person who retains the benefit of the prohibited transaction and at whose instance such transaction is conducted. On the facts found in the adjudication and appellate orders, the petitioners were found to have retained the benefit and to have been involved at whose instance the transactions were carried out.

Conclusion: The issue was answered against the petitioners and in favour of the Revenue.

Issue (ii): Whether Section 122(1A) of the Central Goods and Services Tax Act, 2017 can be applied to transactions relating to the period prior to its commencement on 01.01.2021.

Analysis: Section 122(1A) was treated as a provision that does not create a new substantive violation, but only identifies the person liable for penalty in relation to offences already covered by Section 122(1). The provision was held to be complementary to Section 122(1), and therefore its application was not considered to involve impermissible retrospectivity. Article 20(1) was distinguished on the footing that the liability was penal in the civil-adjudicatory sense and the provision could apply so long as it was in force when the show cause notice was issued.

Conclusion: The issue was answered against the petitioners and in favour of the Revenue.

Final Conclusion: The challenge to the penalty under Section 122(1A) failed on both jurisdictional grounds, and the petitioners were left to pursue the statutory appellate remedy, with the factual findings on retention of benefit and instance remaining open for scrutiny before the appellate forum.

Ratio Decidendi: Section 122(1A) of the Central Goods and Services Tax Act, 2017 applies to the person who retains the benefit of the transaction and at whose instance the offending transaction is conducted, and its operation is not retrospective merely because the underlying conduct commenced before the provision came into force, so long as the provision was in force when proceedings were initiated.

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