TaxTMI 
TaxTMI 
2026 (6) TMI 629
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeal dated 26.08.2025 whereby in exercise of powers under Section 122(1A) of the Central Goods and Service Tax Act, 2017, (for short, the Act of 2017), the Petitioners in both the writ petitions have been respectively imposed a penalty equivalent to the tax evaded by M/S Quantum Infratech, which is a partnership firm wherein both the Petitioners are partners. 3. The Petitioners herein have an alternative and efficacious remedy to file Appeal under Section 112 of the Act of 2017. However, the Petitioners have approached this Court by challenging the Order-in-Original dated 04.02.2025 as well as the Order-in-Appeal dated 26.08.2025 primarily on two jurisdictional issues, which were- (a) The penalty in terms of Section 122(1A) of the Act of 2017 can be imposed only upon the taxable person i.e. M/S Quantum Infratech and not the Petitioners who are only partners of the said firm. The basis of the said contention are the judgments of the learned Division Bench of the Bombay High Court in the case of Amit Manilal Haria and Others Vs. Joint Commissioner, CGST and Central Excise and Another reported in 2026 SCC OnLine Bom 1510 and Shantanu Sanjay Hundekari Vs. Union of India an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... up for consideration by the Appellate Tribunal, the interim order so passed in the said writ proceedings shall continue, subject to filing the Appeal within 30 (thirty) days from the date of the said judgment. 6. The above perspective is relevant inasmuch as if the questions which have been urged in the instant proceedings by the Petitioners are allowed in their favour, then the Order-in-Original dated 04.02.2025 as well as the Order-in-Appeal dated 26.08.2025, qua the Petitioners in the instant proceedings can be interfered with. However, in the circumstances, the jurisdictional questions which have been urged in the instant proceedings are decided against the Petitioners, this Court has to grant the liberty to the Petitioners to approach the Appellate Tribunal. The reason for such course of action is on the ground that if in terms of the liberty so granted to the Partnership Firm of the Petitioners herein, the appeal is preferred before the Appellate Tribunal and thereupon the Appellate Tribunal interferes with the demand so made in the Order-in-Original dated 04.02.2025 which have been confirmed by the Order-in-Appeal dated 26.08.2025, then the imposition of the penalty, qua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....017 issued on 30-08-2023 and 01-11-2023 by raising objection to the proceeding vide letter dated 11-09-2023 and 09-11-2023 which appears to be the afterthought and deliberate attempt to hinder the process of investigation and to hide the omission and commission done while reflecting the tax liabilities. Thus, he also found involved in the offences as described in Section 122(1)(i), Section 122(1)(xv), Section 122(1)(xvii) of the CGST Act, 2017 as much as that they have suppressed the turnover and supplied service without issue of any invoices as they collected undisclosed amount in cash from their customers for supply of service for which they have not issued any documents including invoices or receipt vouchers or any other documents disclosing such particulars of receipt and as such have not declared such amount by filing GST returns. Thus Shri Mayank Bansal (Noticee No. 2) appears to have concerned himself in retaining the benefits of transaction performed by supply of taxable service without issuance of any Tax invoice and at whose instances such transaction is conducted and as such rendering himself liable for penalty under the provision of Section 122(1A) of CGST Act, 2017 rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t whose instances such transaction is conducted and as such rendering himself liable for penalty under the provision of Section 122(1A) of CGST Act, 2017 read with similar provision under Assam GST Act, 2017." 10. In the said Show Cause Notice dated 03.08.2024, the Petitioners in both the petitions were show caused as to why penalty under Section 122(1A) of the Act of 2017 read with the Assam Goods and Services Tax Act, 2017 (for short 'the Assam Act') should not be imposed upon them for acts of involvement in evasion of GST and committing offence as mentioned in Paragraph Nos. 9.6 and 9.7 of the said notice. 11. It is an admitted fact as would be seen from the materials on record that the Petitioners herein did not submit any reply to the allegations contained in Paragraph Nos. 9.6 and 9.7 of the Show Cause Notice. Be that as it may, the Petitioners as well as the authorized representative of M/S Quantum Infratech appeared for personal hearing and pursuant thereto, the Order-in-Original dated 04.02.2025 was passed whereby the Proper Officer, amongst others, categorically came to the opinion that both the Petitioners failed to act in accordance with the provisions of the Act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s M/S Quantum Infratech and therefore the imposition of penalty upon the Petitioners under Section 122(A) of the Act of 2017 was beyond the powers conferred upon the Proper Officer to do so and as such, the impugned Order-in-Original dated 04.02.2025 as well as impugned Order-in-Appeal dated 26.08.2025, insofar as penalty have been imposed upon the Petitioners are required to be interfered with. In that regard, he has referred to the judgments of the learned Division Bench of the Bombay High Court in the case of Shantanu Sanjay Hundekari (supra) and Amit Manilal Haria (supra) and submitted that the learned Division Bench of the Bombay High Court had categorically held in both the judgments that the penalty in terms of Section 122(1A) of the Act of 2017 has necessarily to be imposed upon the taxable person inasmuch as the contravention can only be committed by the taxable person. The learned counsel referred to Paragraph Nos. 22 and 23 of the judgment of the learned Division Bench of the Bombay High Court in the case of Amit Manilal Haria (supra) to substantiate his submissions. 17. The learned counsel further submitted that the judgment in the case of Amit Manilal Haria (supra) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....counsel further submitted that Sub-Section (2) of Section 122 of the Act of 2017 refers to a "registered person" and not a "taxable person" or "any person". The learned Senior counsel therefore submitted that when the Legislature had specifically differentiated in Section 122 of the Act of 2017, the different types of persons, namely the "taxable person", "any person", "registered person", to arrive at a conclusion that the term "any person" mentioned in Section 122(1A) of the Act of 2017 would mean the "taxable person" would not only be contrary to the Act of 2017 but would also amount to rewriting the provision of Sub-Section (1A) of Section 122 of the Act of 2017. 20. The learned Senior counsel further submitted that Section 2 of the Act of 2017 provides various definitions. The term "person" is defined in Section 2(84) of the Act of 2017. Section 2(94) of the Act of 2017 defines the term "registered person" whereas Section 2(107) defines the term "taxable person". He therefore submitted that when the Act of 2017 specifically defines the various types of persons, i.e. "person", "registered person" and "taxable person" and uses the same in Section 122 of the Act of 2017 separa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 date on which such payment becomes due; (iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (v) fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax; (vi) fails to collect tax in accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hever 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.] (1B) [Any electronic commerce operator, who is liable to collect tax at source under section 52] (i) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply; (ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or (iii) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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 defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (h) any body corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; (j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860 (21 of 1860); (m) trust; and (n) every artificial juridical person, not falling within any of the above;" 25. From a perusal of the above quoted Sub-Section, it would show that the term "person" includes various entities including an individual. One can say it to be the genus of different types of persons. 26. Section 2(107) defines the term "taxable person". The said definition being relevant is reproduced herein under: "2(107) "taxable person" means a person who is registered or liable to be registered under section 22 or section 24;....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he instance of that person such transaction was conducted. 32. Another aspect which is of relevance is the person to be identified to come within the scope of Section 122(1A) of the Act of 2017 is upon the adjudication carried out under Section 122(1) in respect to a taxable person who had committed the violations as stipulated in Clauses (i), (ii) (vii) and (ix) of Section 122(1) of the Act of 2017. 33. Let this Court further proceed on the analysis of Section 122 of the Act of 2017. Sub-Section (2) of Section 122 of the Act of 2017 categorically refers to the term "any registered person" whereas Sub-Section (3) of Section 122 of the Act of 2017 refers to "any person". 34. The above analysis of Section 122 of the Act of 2017 and more particularly Sub-Sections (1), (1A), (2) and (3) of Section 122 would show that the Legislature had identified which "person" would be liable for the penalty. The Legislature in the opinion of this Court having analyzed the requirement and with specific intent inserted Sub-Section (1A) after Sub-Section (1) of Section 122 of the Act of 2017. The Legislature could have inserted or merged the contents of Sub-Section (1A) of Section 122 with Sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Haria (supra) if accepted, it would render the provision of Sub-Section (1A) of Section 122 of the Act of 2017 otiose and nugatory. 38. The opinion herein rendered by this Court finds support from the observation of the learned Division Bench of the Delhi High Court in the Gurudas Mallik Thakur (supra). Paragraphs 27 and 29 of the said judgment are reproduced hereunder: "27. The purpose of section 122(1A) of the CGST Act is clearly to make persons who may be responsible for having created bogus invoices and having utilised ITC without the receipt of goods and services and for distributing ITC in contravention of section 20 of the CGST Act. It can be seen that the manner in which companies function is that there is a management who would be taking the decisions on behalf of taxable persons. These companies being inanimate, the responsibility has, by the wisdom of the Legislature, been fixed under section 122(1A) of the CGST Act upon any person who retains the benefits of a transaction. 29. Such activities would have a greater financial impact on society in general and the economy in particular, therefore section 122(1A) of the CGST Act has been enacted to also m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n such penal provision was not in existence. Thus, there could not have been any retrospective application of any penalty provision. The law in this regard is well-settled including considering the clear provision of article 20(1) of the Constitution which reads thus: "20. Protection in respect of conviction for offences.-(1) No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. (2)...." (emphasis [Here printed in italics.] supplied) 30. Thus, a person cannot be penalised under the law/provision which was not in force for the period in which such alleged acts are stated to have been committed. There could not have been any retrospective application of section 122(1A) of the CGST Act in issuing the impugned show-cause notice for the period July 2017 to January 1, 2021, and for such reason also the impugned order-in-original insofar as such period is concerned, cannot be sustained." 44. From the above quoted....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... It was also observed that the date when the Show Cause Notice was issued, the provisions of Section 122(1A) of the Act of 2017 was in place. The learned Division Bench of the Delhi High Court had also observed that the manner in which the fraudulent ITC had been availed would also show that it was a continuous process and not a one time act of the parties involved for which Section 122(1A) of the Act of 2017 was clearly applicable. 47. At this stage, this Court also finds it relevant to note that in the case of Mukesh Kumar Garg Vs. Union of India and Others reported in 2025 SCC OnLine Del 3324, two questions arose for consideration before the learned Division Bench of the Delhi High Court. One was as to whether the penalty under Section 122(1A) of the Act of 2017 could have been imposed upon any person other than the "taxable person" and the second, on the retrospective application of Section 122(1A) of the Act of 2017. The learned Division Bench of the Delhi High Court was not inclined to entertain the instant writ petition on those two issues and granted liberty to the Petitioner therein to avail remedies under Section 107 of the Act of 2017. A Special Leave to Appeal was f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned therein. 51. This Court further finds it relevant to observe this that the term "retains benefits of a transaction covered under Clauses (i), (ii), (vii) & (ix) of Sub-Section (1)" clearly indicates that the penalty is relatable to the violations referred to in the Clauses (i), (ii), (vii) and (ix) of Sub-Section (1) of Section 122 which was in existence since the inception of the Act of 2017 and as such, there being no new violations created by Section 122(1A) of the Act of 2017, there is no question of the said Sub-Section to be applied retrospectively. 52. This Court also finds it relevant to take note of Section 132 of the Act of 2017. It is of importance to note that opening words of Section 132(1) of the Act of 2017 was amended w.e.f 01.01.2021. The opening words of Section 132(1) reads as: "Whoever commits, or causes to commit and retains the benefit arising out of, any of the following offences, namely " Prior to the amendment, the opening words of Section 132(1) of the Act of 2017 read as follows: "Whoever commits any of the following offences " The offences have been clearly mentioned in Clauses (a), (b), (c), (d), (e), (f), (h) (i) & (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. It is argued on behalf of the appellants that the application by these sections of rules allowing the imposition of special rates which have been imposed under the provisions of Rules 32 and 33 of the Pepsu Sirhind Canal Rules, which could not have been imposed at the time the water was used is bad, as thereby the appellants have been subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. 8. This argument is based on the assumption that the use of water by the appellants was an "offence" and that the imposition of an enhanced water charge under Rules 32 and 33 read with Section 31 of the Canal Act for such use was "a penalty" for such an "offence". This assumption is clearly wrong. "Offence" as was pointed out by this Court in Maqbool Hussain case where Article 20(2) of the Constitution came up for consideration has not been defined in the Constitution. So under Article 367 which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rusal of Sections 122(1) and 122(1A) of the Act of 2017, it would show that Section 122(1A) of the Act of 2017 is complementary to Section 122(1) of the Act of 2017. Section 122(1A) of the Act of 2017 would not spring into action and until violations of Clauses (i), (ii), (vii) and (ix) of Section 122(1) of the Act of 2017 by the taxable person is adjudicated upon. Under such circumstances, the question of applying Section 122(1A) of the Act of 2017 retrospectively or not does not arise. It is however clarified that when the Show Cause Notice was issued, Section 122(1A) of the Act of 2017 should be in operation. This Court duly agrees with the observations of the Delhi High Court in the case of Bhupender Kumar (supra). 54. Accordingly this Court decides the second point for determination opining that the application of Section 122(1A) of the Act of 2017 in the case of Petitioners do not call for interference. 55. The above therefore answers the second point for determination. 56. In the previous segments of the instant judgment, this Court had categorically observed that if the jurisdictional issues raised are decided against the Petitioners, this Court would have to permi....