TaxTMI 
TaxTMI 
2026 (2) TMI 1409
X X X X Extracts X X X X
X X X X Extracts X X X X
....e extent that the petitioners have been ordered with a penalty of Rs. 1,33,60,60,889/- each. The operative portion of the impugned order passed against the petitioners is required to be noted which reads thus: "(F). In respect of Shri, Atul Hirji Mara, Joint Managing Director; Shri, Hiren Gada, Chief Executive Officer, and Shri, Amit Haria, Chief Financial Officer of M/s. Shemaroo Entertainment Limited (i) I impose penalty amounting to Rs. 1,33,60,60,889/- (Rupees One hundred thirty three crores sixty lakh sixty thousand eight hundred and eighty nine only) (inadmissible Input Tax Credit (ITC) availed amounting to Rs. 70,25,61,996/-(CGST of Rs. 35,12,80,998/- & SGST of Rs. 35,12,80,998/-) and ineligible ITC passed on amounting to Rs. 63,34,98,893/- (CGST of Rs. 31,67,49,446/- & SGST of Rs. 31,67,49,446/-)) on Shri, Atul Hirji Maru, Joint Managing Director of M/s Shemaroo Entertainment Limited of an amount equivalent to the fake input-tax credit availed of or passed on, under Section 122(1A) of the CGST Act, 2017 and MGST Act, 2017; (ii) I impose penalty amounting to Rs. 1,33,60,60,889/- (Rupees One hundred thirty three crores sixty lakh sixty thousand eigh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs were also arrested for allegedly committing offences under Section 132(1)(b) and 132(1)(c) of the CGST Act. The petitioners were produced before the Additional Chief Metropolitan Magistrate, 19th Court, Esplanade, Mumbai on 7 September 2023 and were granted bail. Significantly, the statements of the petitioners recorded before the CGST authorities on 6 September 2023, were retracted on 7 September 2023 before the Court of Additional Chief Metropolitan Magistrate, 19th Court, Esplanade, Mumbai. 4. On such backdrop, various summonses were issued to the petitioners from 11 September 2023 to 12 October 2023 and further statements were recorded from time to time. It is the petitioners' case that on 18 September 2023, the company deposited an amount of Rs. 12,00,00,000/- under protest in Form GST DRC-03. An amount of Rs. 2,00,00,000/- was paid in cash and the balance of Rs. 10,00,00,000/- was paid through the Electronic Credit Ledger. 5. On 5 October 2023, the company filed a representation cum letter submitting various documents relating to purchase and sale of rights undertaken by the Company in the course of its business. The company also denied all the allegations of fake in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Hundekari (2025) 27 Centax 14 (S.C.). 10. On 2 December 2024, a personal hearing was granted on the show cause notices issued to the company, as also issued to the petitioners. Consequent thereto on 1 February 2025 respondent No.1 has passed an impugned Order in Original imposing penalties of Rs. 133,60,60,889/- each on the petitioners. Thus, the impugned order to the extent it relates to the petitioners, confirmed the penalties of Rs. 133.60 crores each under Section 122(1A) of the CGST Act and MGST Act which is the subject matter of challenge in the present Writ Petition. 11. It is the case of the petitioners that this penalty equals the alleged wrongful ITC availed of Rs.70.25 crores and passed on of Rs.63.35 crores by the company, and thus the cumulative penalty as imposed on the petitioners comes to about Rs. 400,81,82,667/- (400.81 crs). Respondent No. 2 issued an electronic summary of the impugned order in Form DRC-07 dated 5 February 2025. It is also the petitioners' contention that on 6 March 2025, the bail order dated 7 September 2023 passed in the case of the petitioners, was modified and the conditions for grant of bail were relaxed permitting the petitioners to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kant I. Pandey, Assistant Commissioner of CGST & Central Excise, Mumbai East. It is contended that the impugned order does not travel beyond the period for which the show cause notice was issued, and that a typographical error in the Summary of Order and the period mentioned in the Summary of Order was amended by way of issuance of Corrigendum to the order dated 22 May 2025 and dated 3 June 2025, and also copies of the corrigendum were provided to the petitioners. Insofar as the petitioners' contention on the jurisdictional issue of applicability of Section 122(1A) of the CGST Act is concerned, it is contended that it is an integral part of the CGST Act 2017. It is contended that on the date of issuance of the show cause notice covering the period from July 2017 to March 2022, the provision of Section 122(1A) of the CGST Act was in effect and for such reason the provision of Section 122(1A) was correctly invoked in the show cause notice, issued to the petitioners. It is next contended that by the very wording of the provision, the provision is applicable to the petitioners. It is further contended that in the present case, the petitioners, who are the Joint Managing Director, the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... credit (ITC) of the GST paid on all such expenses. However, later with the help of such fake /bogus ITC, the GST outward liability was discharged. It is further contended that also fake/bogus expense reduced the total income accrued to the petitioners, hence, the assessees paid lesser direct taxes, as the income is artificially reduced. 14. It is next contended that there is no bar under the CGST Act, to issue consolidated Show Cause Notices and Order-In-Original, to cover several financial years, when the same are issued within the limitation provided under the CGST Act and more particularly, when it is an issue within the limitation as prescribed under Section 74(10) of the CGST Act, and for such reason the writ petition ought not to be entertained. Also, reliance is placed on the decision of the learned Single Judge of the Delhi High Court in Mukesh Kumar Garg vs Union Of India & Ors. 2025 (5) TMI 922 - DELHI HIGH COURT to contend that even in the said case the Court was dealing with fake Input Tax Credit and such factual aspect ought not to be gone into in the proceedings of a writ petition. Submissions 15. Mr. Rastogi, learned Counsel for the petitioners has made the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Petitioners under Section 122(1A) of the CGSTax Act, 2017. The penalty has been imposed on the basis of alleged wrongful availment and utilisation of input tax credit of Rs.70,25,61,996/- and alleged erroneous passing on of input tax credit of Rs.63,34,98,893/-, resulting in a total cumulative penalty of Rs.400,81,82,667/- imposed upon the Petitioners. In such context, it is submitted that Section 122(1A) was brought into force prospectively with effect from 1st January 2021 vide Notification No. 92/2020-Central Tax dated 22nd December 2020 whereas the impugned order seeks to impose penalties under Section 122(1A) for a period prior to 1st January 2021. It is the petitioners case that such retrospective application of a penal provision was impermissible apart from the same being unconstitutional and barred under Article 20(1) of the Constitution of India. It is submitted that no person can be penalised under a law which was not in force at the time of the alleged act and, therefore, the invocation of Section 122(1A) for the period prior to 1st January 2021 was ultra vires and non est in law. (iv) The imposition of personal penalties upon the Petitioners, who are employee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration is 'whether the impugned show cause notices and the order passed i.e. the impugned Order-in-Original can be said to be bad, illegal and invalid for want of jurisdiction, considering the provisions of Section 122(1A) of the CGST Act, 2017. 19. Section 122 of the CGST Act falls under Chapter XIX which provides for 'Offences and Penalties'. Section 122 provides for 'Penalty for certain offences'. To appreciate as to whether the basic jurisdictional requirements were present in respondent No.2 exercising authority against the petitioners who are employees of the company, at the outset, it would be imperative to extract Section 122 which reads thus: "Section 122. Penalty for certain offences. (1) Where a taxable person who--- (i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply; (ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; (iii) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (xix) issues any invoice or document by using the registration number of another registered person; (xx) tampers with, or destroys any material evidence or document; (xxi) disposes of or tampers with any goods that have been detained, seized, or attached under this Act, shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher. [(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.] (2) Any registered person ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son exempted from obtaining registration under this Act, shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.]" (emphasis supplied) 20. We may observe that as the opening words of sub-section (1) of Section 122 of the CGST categorically uses the expression a 'taxable person', to whom the said provision would be applicable. In such context, the definition of term 'person' as set out in Section 2(84) as also definition of term 'taxable person' as set out in Section 2(107) are required to be noted, which read thus: "Section 2 - Definition ... ... ... (84) "person" includes--- (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....without issue of any invoice or issues an incorrect or false invoice with regard to any such supply; secondly, issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; thirdly, who takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder; fourthly, who takes or distributes input tax credit in contravention of Section 20, or the rules made thereunder. It is thus seen that the said violations are purely attributable to a taxable person. Hence, there is substance in the contentions as urged on behalf of the petitioners, as to how in the absence of the petitioners being taxable persons, qua the business of the company-M/s. Shemaroo Entertainment Ltd., the petitioners can be held liable for any penalty under the provisions of sub-section (1A). 24. We are of the clear opinion that the legislative intent of sub-section (1A) is quite clear, as necessarily clauses (i), (ii), (vii) or clause (ix) of sub-section (1) are required to be conjointly read with Section (1A), whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... show cause notice were quite similar, namely that the provisions of Section 122(1A) and Section 137 of the of the CGST Act did not apply to the petitioners therein, in the absence of retention of any personal benefit by the petitioners. The contention as urged on behalf of the revenue was also quite similar to one as asserted in the present proceedings to contend that the show cause notice indicated that there was responsibility fastened on the petitioners, in regard to the affairs of the company, hence, the petitioners cannot disown the involvement in the loss of revenue in the manner as described in the show cause notice. It is in such context, the Court observed that as a jurisdictional issue on the validity of the show cause notice was raised, in the context of the only allegation as made against the petitioner in the show cause notice, which was to the effect that he was a Senior Tax Operations Manager cum Authorised Person of M/s Maersk. The petitioner was called upon to show cause as to why penalty equivalent to the tax evaded by M/s Maersk amounting to 3731,00,38,326/- be not imposed as the petitioner had committed an offence. In the reply to the show cause notice, the pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....visions of Section 2(94) of the CGST Act, who would be in a legal position, to retain the benefit of tax on the ransaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1), and at whose instance, such transaction is conducted. In the absence of these basic elements being present, any show cause notice of the nature as issued, would be rendered illegal, for want of jurisdiction as also would stand vitiated by patent non-application of mind. 28. If this is the plain meaning and consequence of the provisions of Section 122(1A), then necessarily the provision would manifest that person like the petitioner, who is a mere employee of MLIPL which is although a group company of Maersk, cannot fall within the purview of the said provision, as the petitioner cannot be a 'taxable' or a 'registered person' within the meaning and purview of the CGST Act so as to retain such benefits as the provision ordains. Hence, there was no question of respondent No. 3 invoking Section 122(1A) against the petitioner. Thus, the designated officer (respondent No. 3) invoking the said provision against the petitioner is an act wholly without jurisdiction, so as to issue the sho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....njay Hundekari (supra). The Supreme Court dismissed the special leave petitions by the following order:- "1. Heard Mr. N. Venkataraman, the learned Additional Solicitor General appearing for the Revenue and Ms. Anuradha Dutt, the learned counsel appearing for the respondents. 2. Delay condoned. 3. The High Court while allowing the Writ Petitions filed by the respondents, quashed the show cause notices issued by the Revenue seeking recovery of Rs. 3731 Crore holding as under in Paras 32 and 33 respectively:- 32. For the aforesaid reasons, it is clear from the relevant contents of the show cause notice that the basic jurisdictional requirements/ingredients, are nor attracted for issuance of the show cause notice under Section 74 of the CGST Act so as to inter alia invoke Section 122(1-A) and Section 137 against the petitioner. Even otherwise, it is ill-conceivable to read and recognize into the provisions of Section 122 and Section 137, of the CGST Act any principle of vicarious liability being attracted. There could be none. Thus, Respondent no. 3 clearly lacks Jurisdiction to adjudicate the show cause notice in its applicability to the petitioner....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-in-original, against the petitioners. This is also clear from the reading of the reply affidavit which do not in any manner sets out as to how such basic ingredients of sub-section (1A) of Section 122 stood attracted and/or present in the designated officers passing the impugned order-in-original against the petitioners. 28. As a result of the aforesaid discussion, the only conclusion, which can be arrived at, is that the show cause notices and the consequent impugned order-in-original as passed against the petitioners would be required to be held to be illegal, being without jurisdiction. 29. The other contention as urged on behalf of the petitioners is that the Competent Authority did not have jurisdiction to retrospectively apply the provisions of sub-section (1A) of Section 122 which came to be incorporated in the CGST Act by Act No.12 of 2020 with effect from 1 January 2021. Admittedly, the period in question, subject matter of the show cause notice is the period from July 2017 to July 2023. Thus, according to the petitioners, the period from July 2017 to 1 January 2021 is the period, when such penal provision was not in existence. Thus, there could not have been any re....