Penalty for same offence on two deemed taxable persons

[SUSHIL BANSAL]

Dear experts,

One taxable person (say X) opened a GST firm. During DGGI search, x  said the firm was opened by Y with his documents, all return filing, banking operations, invoice issuance were done by Y & also admitted that no real transactions done except billing & also admitted that he received certain commission from Y. and during search his business place also not found.

Y in his statements did not agree to the statements of X.

Now in OIO the GST department treated  both X & Y as deemed taxable person

& also said that the firm was opened, operated and controlled by Y.

Imposed penalty u/s 122(1(vii) and 122(1) (ii) for the same amount on both these persons thereby duplicating the amount.

Plz guide whether the action of the GST dept is as per law.

My client is X, whether the facts & statements given by X in search & after that in OIO, the confirmation of the dept also that the firm was opened, operated, controlled by Y will help in getting relief from the penalty to X

[Sadanand Bulbule]

Having conclusively recorded a categorical finding that the GST registration was opened, operated and entirely controlled by Y—who managed all banking operations, return filing, issuance of invoices and execution of the alleged fictitious transactions—the department has acted wholly without jurisdiction and contrary to the scheme of the CGST Act in simultaneously treating X as a ‘deemed taxable person’ for the very same alleged contraventions.

Once the principal role, mens rea and operational control stand judicially fixed on Y, X stands divested of the character of a principal offender and cannot be fastened with penalty under Section 122(1) on an equal footing. The imposition of identical penalties on both X and Y for the same set of invoices and the same quantum of tax is legally impermissible, results in artificial duplication of penalty, violates the settled principle that a fiscal offence can attract penalty only once against the actual perpetrator, and renders the impugned order arbitrary, excessive and unsustainable in law.

AI Summary

GST invoices issued without supply: operational control fixed on Y, equal Section 122(1) penalties on X challenged Section 122(1)(ii) and section 122(1)(vii) are invoked to penalise issuance of invoices without supply and specified contraventions by a taxable person; the order-in-original records that the GST registration, return filing, banking operations and invoice issuance were opened, operated and controlled by Y, while also treating both X and Y as 'deemed taxable persons' and imposing the same quantum of penalty on each for the same invoices and tax amount. The forum response asserts that, once the adjudication fixes operational control and culpable conduct on Y, X cannot be penalised as a principal offender on an equal footing under section 122(1), and duplicative penalties for the same contravention and tax period are impermissible, making the penalty against X vulnerable to being set aside.