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 penalty duplication: identical penalties cannot be imposed on both the document-holder and the operator for the same invoices. Where operational control, banking, filings and invoice issuance were exercised by one person (Y) and X merely provided documents and received commission, treating both as deemed taxable person and imposing identical penalties duplicates liability; penalty should attach to the actual perpetrator who exercised control and mens rea, not be imposed equally on the document-holder.