Bharat Kumar Agarwal Vs Joint Commissioner (AE) (Telangana High Court)
Relief Granted to Managing Director for Separate Appeal via Temporary GST Registration; Direction to Issue Separate DRC-07 Forms for Company and Director
Recently had the opportunity to argue an interesting issue before the Telangana High Court concerning the scope of director liability under Section 122(1A) of the CGST Act, 2017.
The matter involved a situation where personal penalty on a director was effectively levied on the company itself and reflected under the “Others” column, without initiating any independent proceedings against the director.
Key submissions raised included:
- Separate proceedings are required against the director, along with generation of a distinct temporary registration as per Rule 16A of the CGST Rules, 2017 and TGST Rules,2017.
- Section 122(1A) being prospective in nature, applicable only from 01.01.2022.
- The show cause notice being vague, lacking specific allegations on personal benefit derived by the director.
- Settled principle that mere designation as a director does not automatically attract penal liability, as held by the Supreme Court of India.
The Hon’ble Court, while not conclusively deciding all issues, observed that:
- A separate temporary registration ought to be granted to the director, and
- A revised DRC-07 is to be issued distinctly for both the company and the director.
Further, liberty was granted to raise all grounds in appeal under Section 107 of the Act.
