The Punjab and Haryana High Court judgment in Manoj Bansal v. Deputy Director, Directorate of Goods and Services, Gurugram; CRM-M-45265-2025 (O&M); 26/07/2026, addresses an important issue in GST prosecution law. The allegation was serious. The Department alleged wrongful availing of input tax credit of about ₹15.44 crores on the strength of invoices issued by alleged dummy or non-existent firms, without any actual supply of goods.
- Company’s Non-Arraignment Was the Core Legal Issue
- GST Company Was Not Made an Accused
- Section 132 Creates GST Offence While Section 137 Attributes Liability
- Sections 132 and 137 Must Be Read Together
- Vicarious Criminal Liability Is an Exception
- Section 137 Recognises Company and Responsible Persons
- Company’s Offence Is the Gateway to Director’s Liability
- Company Could Not Be Left Out of Prosecution
- Penal Statutes Require Strict Compliance
- GST Enforcement Must Follow the Statutory Framework
- Section 137 Compared With Section 141 of NI Act
- Words “As Well as the Company” Reinforce Arraignment Requirement
- Supreme Court’s Aneeta Hada Principle Applied to GST
- Subsequent Supreme Court Precedents Strengthen the Requirement
- GST Registered Person Framework Makes Company’s Role Central
- Department’s Own Adjudication Record Identified the Company
- Director’s Active Role Cannot Substitute Company’s Arraignment
- Quashing of Complaint Was Not Acquittal on Merits
- GST Prosecution Must Begin With the Correct Accused
Company’s Non-Arraignment Was the Core Legal Issue
However, the issue before the High Court was not the factual adjudication of whether fake ITC had actually been availed. The Court was concerned with a more fundamental legal question: can a Director be prosecuted alone when the alleged offence is attributed to the company, but the company itself is not arraigned as an accused? This distinction is critical in criminal law. Serious allegations do not dilute statutory requirements. A prosecution must be serious not only in allegation but also in legal form.
GST Company Was Not Made an Accused
The complaint was filed against Manoj Bansal in his individual capacity. The company, M/s NIPL, which was the registered person under GST and which had allegedly availed and utilised the disputed ITC, was not made an accused. At the same time, the record showed that the demand-cum-show cause notice under Section 74, the adjudication order and the statutory appeal under Section 107 all related to M/s NIPL. Thus, for civil adjudication, the Department treated the company as the principal taxable person; but for criminal prosecution, the company was omitted. This inconsistency became central to the High Court’s reasoning.
Section 132 Creates GST Offence While Section 137 Attributes Liability
Section 132 of the CGST Act is the primary prosecution provision. It identifies specified acts that may constitute GST offences, including issuance of invoices without supply, availing or utilising ITC without actual receipt of goods or services or both, and wrongful availing or utilising credit. Depending on the amount involved and the nature of the offence, Section 132 leads to imprisonment and a fine. It is therefore not merely a recovery provision. It is a penal provision carrying serious criminal consequences.
Section 137 operates at a different level. It does not itself define the taxable event or the substantive offence in the same manner as Section 132. Instead, Section 137(1) addresses the situation where an offence under the CGST Act is committed by a company. In such a case, every person who, at the time of commission of the offence, was in charge of and responsible to the company for the conduct of its business, as well as the company, is deemed to be guilty and liable to be proceeded against and punished. Section 137(2) further covers cases where the offence is committed with the consent or connivance of, or due to negligence on the part of, any director, manager, secretary or other officer.
Sections 132 and 137 Must Be Read Together
Thus, Section 132 and Section 137 must be read together but not confused. Section 132 identifies the punishable GST offence. Section 137 explains how criminal liability is attributed when that offence is committed by a company. Where the allegation is that the company, as a registered person, availed fake ITC, Section 137 becomes the statutory bridge through which liability may extend to directors or officers. That bridge cannot be used while leaving the company itself outside the prosecution.
Vicarious Criminal Liability Is an Exception
The normal rule of criminal law is that a person is liable for his own act, intention, participation or omission. Vicarious liability is an exception. It attributes liability not merely because a person personally performed every element of the offence, but because the statute deems him liable due to his position, responsibility, consent, connivance or negligence in relation to the company.
This is why vicarious criminal liability must be strictly construed. It cannot be presumed merely because a person is a director. Nor can it be created by departmental assumption. The complaint must satisfy the statutory conditions. It must show that the offence was committed by the company and that the person sought to be prosecuted was, at the relevant time, in charge of and responsible to the company for the conduct of its business, or that the offence was committed with his consent, connivance or negligence.
Section 137 Recognises Company and Responsible Persons
Section 137 therefore has two important dimensions. First, it recognises the company as a prosecutable legal person. Secondly, it extends liability to responsible persons in specified circumstances. The words “as well as the company” are central to this design. They show that the company is not a dispensable background actor. It is part of the statutory offence-liability structure.
Company’s Offence Is the Gateway to Director’s Liability
The High Court rightly focused on the statutory sequence. Where the offence is alleged to have been committed by the company, the company’s offence is the gateway to the Director’s liability. The Director is not prosecuted in the abstract. He is prosecuted because of his connection with the company and his alleged responsibility for the conduct of its business, or his alleged consent, connivance or negligence.
In the present case, the Department itself proceeded on the footing that M/s NIPL had wrongfully availed ITC of ₹15.44 crores without actual supply of goods. The petitioner’s role was alleged because he was a Director of that company and was alleged to be controlling its affairs. Therefore, the prosecution was not an independent prosecution of an individual offence disconnected from the company. It was built upon the alleged offence of the company.
Company Could Not Be Left Out of Prosecution
Once this position was clear, the company could not be left out. If the company was the registered person, the alleged availer of ITC, the noticee under Section 74 and the appellant under Section 107, its absence from the criminal complaint could not be treated as a curable technical omission. It went to the legal maintainability of the prosecution itself.
Penal Statutes Require Strict Compliance
Penal statutes must be strictly construed because they affect liberty and reputation. This does not mean that courts must interpret penal provisions in a way that defeats enforcement. It means that criminal liability must arise only as prescribed by law. If the Legislature has laid down a particular structure for prosecuting company offences, the prosecution must follow that structure.
This principle is especially important under GST, where the same factual matrix may give rise to multiple consequences: adjudication under Sections 73 or 74, recovery, penalty, arrest, and prosecution under Section 132. Each consequence has its own statutory threshold and procedural discipline. A finding or allegation in adjudication may be relevant, but prosecution must independently satisfy the requirements of criminal law and the specific prosecution provisions.
GST Enforcement Must Follow the Statutory Framework
The High Court therefore did not weaken GST enforcement. It insisted that GST enforcement must operate within the framework of law. A defective complaint may fail even where the allegations are serious. The answer to serious tax fraud is not a shortcut in prosecution, but a legally sound prosecution complaint framed against the proper accused with proper statutory averments.
Section 137 Compared With Section 141 of NI Act
The High Court compared Section 137 of the CGST Act with Section 141 of the Negotiable Instruments Act, 1881. Section 141 addresses offences by companies in cheque dishonour cases. It also adopts the structure of a company offence, the liability of persons in charge, and responsibility for the conduct of business. Given this similarity, the provisions were treated as pari materia for the limited purpose of understanding vicarious criminal liability.
This comparison is legally significant. The subject matter of the Negotiable Instruments Act and the CGST Act differs, but the statutory mechanism for company-offence liability is similar. In both cases, the company may be the principal offender, and the directors or officers may be brought in because of their role in relation to the company. Therefore, the settled Supreme Court interpretation under Section 141 provides useful guidance for Section 137.
Words “As Well as the Company” Reinforce Arraignment Requirement
The interpretative lesson is that when Parliament uses similar language to create vicarious liability for company offences, courts normally apply similar safeguards unless the statute indicates a contrary intention. Section 137 contains no indication that the company can be bypassed where the alleged offence is that of the company. On the contrary, the words “as well as the company” reinforce the need to arraign the company.
Supreme Court’s Aneeta Hada Principle Applied to GST
The High Court’s primary authority in this matter is Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., (2012) 5 SCC 661. In this case, a three-judge bench of the Supreme Court established that for a prosecution under Section 141 of the Negotiable Instruments Act, it is essential to include the company as an accused. The company’s commission of the offence is a necessary condition for holding others vicariously liable. This principle is not just a drafting guideline; it is based on the company’s separate legal personality and the statutory basis of vicarious liability. If the company is accused of the offence, the prosecution must focus on the company itself, enabling an examination of the liability of those in charge. Without the company’s involvement, the vicarious liability of the Director has no statutory basis.
In the present case, the Punjab and Haryana High Court applied this principle to Section 137 of the CGST Act, giving full effect to the phrase “as well as the company.” Therefore, when an offence is attributed to the company and the Director is prosecuted due to their role, the company must be arraigned as an accused.
Subsequent Supreme Court Precedents Strengthen the Requirement
The High Court also referred to Anil Gupta v. Star India (P) Ltd., (2014) 10 SCC 373, where proceedings against an individual were quashed because the company was not before the Court. This decision followed Aneeta Hada and confirmed that an individual’s prosecution cannot be sustained when the statutory framework requires the company to be an accused.
Similarly, in Himanshu v. B. Shivamurthy, (2019) 3 SCC 797, the Supreme Court held that a complaint against a Director was not maintainable in the absence of the company being arraigned as an accused. The Director’s signature on the cheque on behalf of the company did not alter the position, as liability flowed from the company’s act.
The Court also referred to Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781, and Dayle De Souza v. Government of India, (2021) 20 SCC 135. These decisions collectively show that arraignment of the company is not a narrow technical requirement confined to cheque dishonour cases. It is part of the broader discipline of statutory vicarious criminal liability, where the company is the principal alleged offender.
GST Registered Person Framework Makes Company’s Role Central
The GST framework further supports this conclusion. Section 16 of the CGST Act permits every registered person to take ITC, subject to the conditions and restrictions prescribed under the Act. Section 2(94) defines “registered person” as a person registered under Section 25, excluding a person having a Unique Identity Number. Thus, ITC entitlement and availment are linked to the registered person under GST.
In the present case, M/s NIPL was the registered person. It was the company that allegedly availed and utilised the ITC. The petitioner, in his individual capacity, was not the registered person who availed ITC under Section 16. This does not mean that a Director can never be prosecuted for a GST offence. It only means that where the offence is alleged to have been committed by the company as the registered person, the company’s role must be properly reflected in the prosecution.
Department’s Own Adjudication Record Identified the Company
The surrounding statutory proceedings confirmed the same position. The demand-cum-show cause notice under Section 74 was issued to M/s NIPL. The adjudication order was passed against M/s NIPL. The appeal under Section 107 was filed by M/s NIPL. Therefore, the Department’s own adjudication record treated the company as the person chargeable and the entity involved in the alleged ITC irregularity. In such circumstances, omitting the company from prosecution could not be reconciled with the statutory record.
Director’s Active Role Cannot Substitute Company’s Arraignment
The Department argued that the petitioner was the beneficiary and mastermind of the alleged fraudulent arrangement and was actively involved in the company’s management, operations and GST affairs. Such allegations, if properly pleaded and proved, may be relevant for attracting Section 137 against a Director by showing responsibility, consent, connivance or negligence.
However, where the offence itself is alleged to have been committed by the company, allegations of the Director’s active role cannot cure the absence of the company from the complaint. In a vicarious liability prosecution, the case must first be anchored in the company’s offence, and only thereafter can the Director’s role be examined.
Thus, if an independent personal offence is alleged, it must be specifically pleaded and established. But where liability flows from a company offence, the company cannot be bypassed. Serious allegations cannot replace statutory compliance.
Quashing of Complaint Was Not Acquittal on Merits
The High Court quashed the complaint titled Deputy Director v. Manoj Bansal and all consequential proceedings because the Director alone had been prosecuted without arraigning the company, though the alleged offence was attributed to the company.
However, the Department’s liberty to proceed under Section 132 of the CGST Act in accordance with law was preserved. The judgment did not hold that the alleged fake ITC transaction was genuine, nor did it grant immunity from future lawful prosecution. It only held that the complaint, as framed, suffered from a foundational legal defect.
GST Prosecution Must Begin With the Correct Accused
Where the alleged GST offence is attributed to a company and the Director’s liability is invoked on a vicarious basis under Section 137, the company should ordinarily be arraigned as an accused. The prosecution complaint must align with the adjudication record and correctly identify the principal offender.
Thus, Section 137 is structural, not merely procedural: in a company-offence prosecution, the correct sequence is company first, Director next.
