Employees Not Liable for GST Penalty in Absence of Taxable Person Status: Bombay HC

Amit Manilal Haria Vs Joint Commissioner (Bombay High Court)

Employees Cannot Be Penalised under Section 122(1A) of the CGST Act, Without Being ‘Taxable Persons’ and Retaining Transactional Benefit: Bombay High Court

The Bombay High Court held that penalties under Section 122(1A) of the CGST Act cannot be imposed on company employees unless they qualify as “taxable persons” and have personally retained benefits from the alleged transactions. The case involved employees penalised for alleged fraudulent Input Tax Credit (ITC) transactions of the company through fake invoices. The Court ruled that Section 122(1A) must be read in conjunction with Section 122(1), which applies only to taxable persons, thereby excluding employees acting in a professional capacity without personal gain. It further held that the provision requires two conditions—retention of benefit and conduct of transactions at the person’s instance—both of which were absent. Additionally, the Court ruled that Section 122(1A), introduced from January 1, 2021, cannot be applied retrospectively to earlier periods due to Article 20(1) of the Constitution. Consequently, penalties imposed were quashed as without jurisdiction.

Facts:

Amit Manilal Haria along with Hiren Uday Gada and Atul Hirji Maru (‘the Petitioners’) were officers/employees of M/s. Shemaroo Entertainment Ltd., holding positions as Chief Financial Officer, Chief Executive Officer and Joint Managing Director respectively.