TaxTMI 
TaxTMI 
2026 (10) TMI 97
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....(C) 14748/2025, CM APPL. 60517/2025 and CM APPL. 60518/2025, W. P. (C) 14757/2025, CM APPL. 60736/2025 and CM APPL. 60737/2025, W. P. (C) 14794/2025, CM APPL. 60821/2025 and CM APPL. 60822/2025, W. P. (C) 16821/2025 and CM APPL. 69126/2025. - -<br>GST<br>HON'BLE MR. JUSTICE ANIL KSHETARPAL AND HON'BLE MR. JUSTICE BHARAT PARASHAR W.P.(C) 13883/2026, CM APPL. 64918/2026, CM APPL. 64919/2026, CM APPL. 64920/2026 and CM APPL. 64921/2026, W.P.(C) 16623/2024 and CM APPL. 70347/2024, W.P.(C) 16685/2024 and CM APPL. 70601/2024, W.P.(C) 13363/2025 and CM APPL. 54793/2025, W.P.(C) 14149/2025, W.P.(C) 14747/2025, CM APPL. 60515/2025 and CM APPL. 60516/2025, W.P.(C) 14748/2025, CM APPL. 60517/2025 and CM APPL. 60518/2025, W.P.(C) 14757/2025, CM APPL. 60736/2025 and CM APPL. 60737/2025, W.P.(C) 14794/2025, CM APPL. 60821/2025 and CM APPL. 60822/2025, W.P.(C) 16821/2025 and CM APPL. 69126/2025, W.P.(C) 5193/2025 and CM APPL. 23619/2025, W.P.(C) 5643/2025 and CM APPL. 25699/2025, W.P.(C) 5795/2025 and CM APPL. 26396/2025, W.P.(C) 6062/2025, W.P.(C) 6862/2025 and CM APPL. 31095/2025, W.P.(C) 6913/2025 and CM APPL. 31279/2025, W.P.(C) 9864/2025, CM APPL. 41182/2025 and CM APPL. 57139/202....
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....al questions that arise for consideration in the present batch of Petitions are as follows: i. Whether it is permissible to order recovery of penalty under Section 122(1A) of the Act of 2017 against a non-taxable person? ii. whether the penalty as envisaged under Section 122(1A) of the Act of 2017 applies prospectively to offences committed after 01.01.2021, the date on which the provision came into effect? 4. Learned counsel representing the Petitioners have filed a common written submission in W.P.(C) 5193/2025, W.P.(C) 6862/2025 and W.P.(C) 6913/2025. Accordingly, for the purpose of adjudicating the controversy arising in the present batch, the aforesaid Petitions shall be treated as the lead cases. BRIEF BACKGROUND: 5. Pithily put, the present Petitions arise out of a common SCN dated 27.07.2023, subsequent to which the Adjudicating Authority (AA) by way of a common OIO dated 22.01.2025 passed under Section 74 of the Act of 2017 against M/s Worlds Window Impex India Private Limited ['the Company'], confirmed a demand on the allegation that the Company had engaged in circular trading and had irregularly availed Input Tax Credit (ITC) amounting to Rs. 2....
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....peration upon Section 122(1A), whereas several other provisions of the Finance Act, 2020 were expressly made retrospective from 01.07.2017. The Legislature, despite notifying Section 122(1A) and other amendments through the same notification, consciously withheld retrospective effect from Section 122(1A), thereby evincing a clear legislative intent that the provision would operate only prospectively from 01.01.2021. 8.5 Relying upon CIT, New Delhi v. Vatika Township Pvt. Ltd. (2015) 1 SCC 1, it was contended that where the Legislature prescribes a specific date for commencement of a penal provision, the tax administration cannot apply it to transactions preceding its enforcement. 8.6 In addition to the aforestated, with respect to the application of the Section 122(1A) of the Act of 2017, it has been argued that the provision having come into force only on 01.01.2021, could not be invoked in respect of transactions undertaken prior thereto, as such retrospective application would offend Article 20(1) of the Constitution. Reliance was placed upon CCE, Ahmedabad v. Orient Fabrics (P) Ltd. (2004) 1 SCC 597, and Ritesh Agarwal and Anr. v. SEBI and Ors. (2008) 8 SCC 20....
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....d failed to consider their replies and submissions, rendering the OIO a non-speaking order suffering from non-application of mind. 8.12 Lastly, it was submitted that the AA has imposed penalties equal to the entire alleged inadmissible ITC not only upon the Company but also separately upon each of the three Petitioners under Section 122(1A), resulting in multiple penalties arising out of the same alleged transaction. Such simultaneous imposition, without establishing an independent statutory basis or individual culpability for each Petitioner, was argued to be arbitrary, disproportionate and contrary to the scheme of the Act of 2017. 9. Per contra, learned counsel representing the Respondent has made the following submissions: 9.1 At the outset, it has been argued that the applicability of Section 122(1A) of the CGST Act to the facts of a particular case, including the correctness of the penalty imposed thereunder, falls within the jurisdiction of the adjudicating and appellate authorities constituted under the Act. Since no challenge has been raised to the constitutional validity of Section 122(1A) of the Act of 2017, the Petitioner ought to avail the statutory reme....
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....ons of fact ought ordinarily to be left to the statutory adjudicatory process. 9.7 Controverting the application of Article 20(1) of the Constitution, it had been argued that Section 122(1A) does not attract the prohibition contained under the aforesaid Article, since the penalty thereunder is a civil/fiscal consequence of a statutory contravention and does not amount to punishment for a criminal offence. The underlying conduct was already proscribed under the Act of 2017, and Section 122(1A) merely provides for the fiscal consequence of such infraction. Reliance was placed on SEBI v. Ajay Agarwal (2010) 3 SCC 765, wherein the Supreme Court, while considering an adjudicatory penalty, distinguished such proceedings from criminal prosecution and held that the protection under Article 20(1) is not attracted to such civil penalties. 9.8 It was, therefore, submitted that the subsequent prescription of penalty under Section 122(1A) does not amount to creation of an ex post facto offence or punishment within the meaning of Article 20(1). Accordingly, it was contended that the challenge based on the constitutional proscription against ex post facto laws is misconceived. 9.9 Learne....
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....h shall govern the determination of the personal liability sought to be fastened upon the Petitioners, we deem it appropriate to first reproduce the relevant provisions of the Act of 2017, which shall form the foundation for our ensuing analysis. The relevant provisions are as follows: 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 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 ....
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....ched under this Act, he 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.] [(1-B) [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 ....
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....any of the following offences], namely:- (a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax; (b) 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 leading to wrongful availment or utilisation of input tax credit or refund of tax; [(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;] (d) 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; (e) evades tax or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);" 11. Notably, the two issues concerning the applicability and effect of Section 122(1A) of the Act of 2017, as identified in paragraph no.3 hereinabove, are not matters arising for consideration for the first time before Court. These questions have already been considered by various ....
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....g the provision), there could not have been any retrospective application of any penalty provision. The Court expressly invoked Article 20(1) of the Constitution and observed that a person could not 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. Accordingly, it held the SCN and the consequential order could not be sustained for the pre 01.01.2021 period, independent of the finding pertaining to taxable person. 15. This Court in Gurudas Mallik (Supra), while dealing with two directors of a company on whom penalty under Section 122(1A) had been imposed alongside the company, its promoter, and its CEO, examined Sections 2(84), 83, 122(1) and 122(1A) of the Act of 2017 and held that the statute makes a clear distinction between the taxable person and any person. The Court expressly adopted the reasoning of Bharat Parihar (Supra), to hold that the purpose of Section 122 (1A) is to hold accountable persons who are responsible for creating bogus invoices, fraudulently availing ITC without actual receipt of goods or services or distributing ITC in violation of Section 20 of the Act of 2017. Since c....
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....m vehicle. 19. With respect to the temporal application of Section 122(1A) of the Act of 2017, the Court held that the said provision does not create a new offence or violation, but merely identifies the person liable for penalty in respect of violations already contemplated under Section 122(1) of the Act of 2017. Accordingly, its application does not constitute retrospective imposition of a penal provision. Relying on Jawala Ram and Ors. v. State of Pepsu (now Punjab) and Ors. 1961 SCC OnLine SC 47, the Court further held that Article 20(1) of the Constitution applies to offences and punishments of a criminal nature and not to every civil penalty. 20. On the aforesaid reasoning, the Court was of the view that Section 122(1A) being complementary to Section 122(1) may be invoked where it was in force on the date of issuance of the SCN. Thus, following the principle laid down in Bhupender Kumar (Supra), the Court upheld its application to transactions commencing from 2017-18, notwithstanding that the provision came into force subsequently. 21. Having noticed the divergent views expressed by the various High Courts, we shall now proceed to examine, on an independent consider....
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....er Section 25, other than a person having a Unique Identity Number. Sub-section (3), once again, employs the expression 'any person'. 25. The aforesaid distinction becomes even more apparent when Section 2(84) of the Act of 2017 is noticed. The expression 'person' therein, has been defined in the widest terms and includes an individual, a Hindu Undivided Family (HUF), a company, a firm, a LLP, an association of persons, a body corporate, a co-operative society, a local authority, the Government, a society, a trust and every artificial juridical person not falling within the preceding categories. 26. This deliberate and repeated variation in language, within the same Section, cannot be treated as a matter of legislative accident and must be read together. The Legislature while enacting different sub-sections of the very same provision, in the same breath, has consciously employed different expressions, being, 'taxable person' in sub-section (1), 'any person' in sub-sections (1A) and (3), and 'any registered person' in sub-section (2). 27. It is a settled principle of interpretation that where the Legislature has deliberately used different expressions in the same statutory ....
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....spectful agreement with this reasoning, for the reasons already indicated above. 32. However, this Court is unable to persuade itself to the contrary reasoning adopted by the Bombay High Court in Shantanu Sanjay Hundekari (Supra) and Amit Manilal Haria (Supra). A company, a LLP, a partnership firm, or any other juridical person recognised under Section 2(84) is, by its very nature, incapable of acting except through natural persons who manage and control its affairs. If sub-section (1A) is confined only to the 'taxable person', it would in most cases stand confined to an artificial entity that can never, on its own, retain a benefit or direct a transaction, thereby rendering the provision otiose in precisely those cases of corporate or organised fraud which it was intended to address. 33. We are also unable to reconcile this narrower construction with the fact that sub-section (3) of Section 122, dealing with aiding, abetting and similar ancillary conduct, already uses the expression 'any person' without any suggestion that it is confined to a taxable person; there is no principled basis to read the identical expression differently within sub-sections of the very same Section....
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....y threshold is crossed, prosecution under Section 132 of the Act of 2017. 40. The statutory parallel assumes greater significance when the amendments to both provisions, brought into force with effect from 01.01.2021, are noticed. Section 122 was amended by insertion of sub-section (1A), making liable 'any person' who retains the benefit of the specified transaction and at whose instance such transaction is conducted. Simultaneously, the opening words of Section 132(1) were amended from 'Whoever commits any of the following offences' to 'Whoever commits, or causes to commit and retains the benefit arising out of, any of the following offences'. Thus, the two provisions came to employ substantially corresponding expressions for identifying the person upon whom the consequences of the fraudulent transaction may fall. 41. Prior to the said amendment, a dichotomy existed between the two provisions, arising from two distinct gaps. The expression 'whoever commits' in the unamended Section 132 was wide as to the class of persons covered, it was not confined, for instance, to a person holding the status of a taxable person, but narrow as to the role required, in that it extended only....
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.... an offence punishable with imprisonment, is nevertheless penal in consequence and is imposed for specified contraventions. Its applicability must, therefore, bear a nexus with the date of the underlying act or transaction. The subsequent issuance of a SCN cannot alter the date on which the alleged contravention was committed. 46. The contrary view that the temporal applicability of Section 122(1A) is to be determined by the date of issuance of the SCN, rather than the date of the underlying transaction, does not commend acceptance. A SCN may be issued either promptly or after a considerable lapse of time. To make the applicability of a penal provision dependent upon the date of such notice would mean that identical transactions could attract different legal consequences solely by reason of the time at which the Department initiates proceedings. Such an interpretation would impermissibly make the operation of a penal provision contingent upon a subsequent administrative act. 47. This conclusion is also consistent with and reinforced by the constitutional protection under Article 20(1) of the Constitution, discussed above. The mere fact that Section 122(1A) forms part of a pro....
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....e question of temporal applicability alone, while, as recorded under Issue (i) above, respectfully declining to follow the same judgment insofar as it confines the expression 'any person' to a 'taxable person'. Re: Objection as to Maintainability/Alternative Remedy 52. Learned counsel for the Respondents had urged, relying upon Mafatlal Industries Ltd. (Supra) and Embassy Property Developments Pvt. Ltd. (Supra), that the Petitioners ought to be relegated to the alternative and efficacious remedy of appeal under Section 107 of the Act of 2017, and the present petitions, at best, raise questions of erroneous exercise of jurisdiction rather than want of jurisdiction. We are unable to accept this submission as a bar to the exercise of our jurisdiction under Article 226 in the present batch. 53. As noticed at the outset, the present Petitions raise substantial and recurring questions of law concerning the interpretation and temporal applicability of Section 122(1A) of the Act of 2017, upon which divergent views have been expressed by this Court, the Bombay High Court and the Gauhati High Court. The resultant uncertainty warranted an authoritative determination of the questions ....