Vicarious liability for fraudulent input tax credit requires prosecution of the company before proceedings against its director can continue.

Vicarious criminal liability under Section 137 of the CGST Act requires that the company committing the offence be prosecuted alongside the persons in charge. The provision is described as pari materia with Section 141 of the Negotiable Instruments Act, making prosecution of the company a condition precedent to liability of its director where the alleged wrongful input tax credit availment was by the company as the registered person. A complaint against a director solely in his personal capacity, without arraigning the company, is therefore stated to be not maintainable, and consequential criminal proceedings cannot continue.

---

---

Issues: Whether a director may be prosecuted under the Central Goods and Services Tax Act, 2017 for fraudulent availment of input tax credit by a company without arraigning the company as an accused.

Analysis: Section 137 of the Central Goods and Services Tax Act, 2017 is pari materia with Section 141 of the Negotiable Instruments Act, 1881. The statutory phrase making persons in charge liable "as well as the company" makes commission of the offence by, and prosecution of, the company a condition precedent for fastening vicarious criminal liability on its director. The alleged wrongful availment of input tax credit was by the company, which alone was the registered person entitled to take input tax credit under Section 16, while the director's alleged role arose solely from his position in the company. The company had not been arraigned in the complaint.

Conclusion: Prosecution of the director in his personal capacity without arraigning the company is not maintainable; the criminal complaint and consequential proceedings cannot continue against him.

---