2026-VIL-776-P&H
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SGST High Court Cases

GST - Prosecution of Director for company's offence - Vicarious liability and requirement to implead company - A complaint was filed against Petitioner, a Director, under Section 132 of CGST Act, 2017 for wrongfully availing Input Tax Credit. The Department alleged that M/s NIPL, a registered person and company of which Petitioner was Director, had availed fraudulent ITC without receipt of goods through invoices of dummy firms. Though the Department had issued Show Cause Notice to M/s NIPL and the company had filed appeal, the complaint was filed against the Petitioner individually without arraigning M/s NIPL as an accused. Petitioner contended that prosecution against him without impleading the company was not maintainable - Whether a Director of a company can be prosecuted individually under Section 137 of CGST Act without the company being arraigned as an accused - HELD - Section 137 of CGST Act use the term ‘person’ and refer it to a Company. Applying strict construction of penal statutes and consistent with binding precedent of the Apex Court, the commission of offence by the company is an express condition precedent to attract vicarious liability of others - The words “as well as the company” appearing in Section 137 make it clear that when the company can be prosecuted, only then the persons mentioned in other categories could be vicariously liable. Commission of offence by the company-M/s NIPL is an express condition precedent to attract the vicariously liability of the petitioner, who was the Director of M/s NIPL at the relevant time – Further, it is M/s NIPL, which is a registered person within the meaning of Section 2(94) of the CGST Act. It is M/s NIPL which has availed the ITC fraudulently. It is also the admitted position that demand-cum-show cause notice was issued to M/s NIPL and it was M/s NIPL which filed an appeal before the Appellate Authority – The prosecution of the Director in personal capacity without arraigning the company cannot proceed against settled principles of law - The complaint against petitioner is quashed and all subsequent proceedings are set aside. The respondent is at liberty to proceed for the offence under Section 132 of CGST Act in accordance with law - The petition is allowed
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