2026-VIL-1128-DEL
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SGST High Court Cases

GST - Penalty under Section 122(1A) of CGST Act, 2017 - Meaning of expression 'any person' - Petitioners, who served as directors of the company at different points in time, were fastened with personal penalty under Section 122(1A) and Section 125 on the allegation of circular trading and irregular availment of Input Tax Credit - Petitioners contended that neither the SCN nor the Order attributes any specific act, omission or role to them and that they were employee-directors who were neither promoters nor shareholders - Whether it is permissible to order recovery of penalty under Section 122(1A) against a non-taxable person - HELD - Section 122(1A) operates only where two conditions are cumulatively satisfied, namely that the person has retained the benefit of a transaction covered by clauses (i), (ii), (vii) or (ix) of Section 122(1) and that such transaction has been conducted at his instance. These conditions are conjunctive and must be independently established, and the enquiry presupposes that a contravention under those clauses is established against the taxable person - The Legislature has consciously used different expressions in Section 122, namely 'taxable person' in sub-section (1), 'any person' in sub-sections (1A) and (3), and 'any registered person' in sub-section (2). Where different expressions are used in the same statutory scheme, each must ordinarily be given its distinct meaning; construing 'any person' as 'taxable person' would amount to reading into the provision words which the Legislature chose not to employ - Fraudulent ITC transactions are often structured through fictitious or shell entities, and confining the provision to the taxable person would let the actual mastermind and beneficiary escape. A company or other juridical person can act only through natural persons who manage and control its affairs, and a narrower construction would render the provision otiose in cases of corporate fraud - The provision was inserted pursuant to the recommendation of the GST Council to fasten liability upon the real beneficiaries over and above the taxable person, so the intent was to enlarge and not to restrict the class of persons who could be proceeded against - The Court is unable to persuade itself to the contrary reasoning adopted by Bombay High Court in Shantanu Sanjay Hundekari and Amit Manilal Haria cases - The expression 'any person' is not confined to a 'taxable person' but extends to every person, whether or not registered or liable to be registered, who satisfies the twin requirements - The question is answered accordingly and the petitions are disposed of - GST - Temporal applicability of Section 122(1A) of CGST Act, 2017 - Penalty under Section 122(1A) was imposed on the Petitioners by an Order-in-Original passed on a Show Cause Notice issued after the provision came into effect on 01.01.2021, while the alleged transactions pertained to earlier periods - Whether Section 122(1A) applies prospectively to offences committed after 01.01.2021 irrespective of the date of issuance of the SCN - HELD - There is a close statutory parallel between Sections 122 and 132, and the amendments to both provisions were brought into force with effect from 01.01.2021 to remove the dichotomy between them. Section 132 attracts the protection of Article 20(1) and is confined to conduct on or after 01.01.2021. It would be incongruous to treat the corresponding monetary penalty under Section 122(1A), arising from substantially the same conduct and introduced through the same legislative exercise, as available for conduct predating that amendment, in the absence of clear words. -The penalty under Section 122(1A), though civil in form, is penal in consequence, and its applicability must bear a nexus with the date of the underlying act or transaction. The subsequent issuance of a Show Cause Notice cannot alter the date on which the contravention was committed. Making the operation of a penal provision dependent on the date of the notice would mean that identical transactions attract different consequences solely by the time at which the Department initiates proceedings - Section 122(1A) applies prospectively and is attracted only in respect of transactions or acts committed on or after 01.01.2021, irrespective of the date on which the sCN is issued - The question is answered accordingly.
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