2026-VIL-569-GAU
  1. Home
  2. 2026-VIL-569-GAU

SGST High Court Cases

GST - Applicability of Section 122(1A) of the CGST Act, 2017 to Partners of Partnership Firm - Penalty for retention of benefits of fraudulent transactions – Petitioners are Partners of a partnership firm alleged to have been involved in GST evasion – Petitioners contested their liability for penalty under Section 122(1A) of the CGST Act, contending that such penalty can only be imposed on the taxable person (the partnership firm) and not on individual partners - Whether partners of a partnership firm, who are not the registered taxable person, can be held liable for penalty under Section 122(1A) of the CGST Act, 2017 – HELD – The Section 122(1A) applies to any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or (ix) of sub-section (1) and at whose instance such transaction is conducted. The legislature deliberately differentiated between taxable person in sub-section (1), any person in sub-section (1A), and registered person in sub-section (2), indicating distinct legislative intent - When a juridical person like a partnership firm, company, or limited liability partnership commits violations, it cannot do so without involvement of natural persons. The provision aims to fix responsibility on individuals responsible for creating bogus invoices and unauthorized utilization of input tax credit – The distinction drawn by the Division Bench of Bombay High Court that only taxable persons can be penalized would render sub-section (1A) nugatory and otiose. With great respect, this Court cannot agree with the proposition of law laid down by the learned Division Bench of the Bombay High Court in Shantanu Sanjay Hundekari and Amit Manilal Haria cases - The observations of Delhi High Court in Gurudas Mallik Thakur case support the interpretation that Section 122(1A) of the CGST Act refers to such person who retains the benefit of the transaction - The Partners of the partnership firm can be held liable for penalty under Section 122(1A) when they retain benefits of the transaction and the transaction is conducted at their instance. In view of the two conditions being satisfied by the fact finding authority that the petitioners herein have retained the benefit of the transactions covered under Clause (i) and Clause (vii) of Sub-Section (1) of Section 122 of the Act of 2017 and at their instance, such transactions were conducted, the petitioners would come within the ambit of Section 122(1A) of the CGST Act and would be liable to the penalty – Ordered accordinglyrnrnIssue 2: Retrospective Applicability of Section 122(1A) for periods prior to 01.01.2021 – While the SCN covered the period from July 2017 to March 2023, the Section 122(1A) came into force with effect from 01.01.2021 - The petitioners contended that for periods prior to 01.01.2021, no penalty under Section 122(1A) could be imposed - Whether Section 122(1A) of the CGST Act, 2017, which came into force on 01.01.2021, can be retrospectively applied to impose penalties for violations committed during the period prior to 01.01.2021 – HELD - The Section 122(1A) does not create any new independent violation but merely identifies the person at whose instance violations of clauses (i), (ii), (vii) and (ix) of Section 122(1) were committed and who retained benefits thereof. Since Section 122(1) existed from the inception of the Act, and Section 122(1A) is complementary to and dependent upon violations under Section 122(1), there is no question of retrospective application of Section 122(1A). The penalty is relatable to violations existing since the Act's inception - The question of retrospectivity does not arise as Section 122(1A) does not spring into action until violations are adjudicated upon. What is essential is that Section 122(1A) should be in operation when the show cause notice is issued – The Section 122(1A) is applicable for transactions covered under clauses (i), (ii), (vii) and (ix) of sub-section (1) of Section 122 even for periods prior to coming into effect of Section 122(1A) – The writ petitions are disposed of
Download File

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Weekly Summary

VIL Video

GST Recent Updates: GSTAT, EWB...
By CA Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Security-Code
New Code?

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Security-Code
New Code?

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?