Shri Shiv Kumar Mittal Vs Union of India and Others (Gauhati High Court)
GST Penalty on Partner for Firm’s Alleged Wrongful ITC: Gauhati High Court Grants Interim Protection
Introduction
The Gauhati High Court has granted interim protection to a partner facing separate penalty proceedings arising from Input Tax Credit allegedly wrongly availed by his partnership firm. The Court directed the respondents not to initiate further action under the challenged show-cause notice until the next returnable date.
In Shri Shiv Kumar Mittal v. Union of India and Others, WP(C)/6027/2026, Justice Soumitra Saikia passed the order on 4 November 2026. The Court expressed a prima facie view that separate proceedings against an individual partner did not appear necessary when proceedings concerning the disputed ITC and penalty were already being pursued against the firm.
Background of the Dispute
The petitioner, Shiv Kumar Mittal, is a partner of M/s G. M. Coke Industries. His wife, Shikha Mittal, is the other partner. The firm’s GST registration took effect from 1 July 2017.
The dispute arose from a demand-cum-show-cause notice dated 30 September 2026, issued by the Joint Director, Directorate General of GST Intelligence, Guwahati Zonal Unit.
According to the allegations recorded in the order, ITC had been availed against invoices and corresponding e-way bills issued by 17 suppliers, without actual receipt of the underlying supplies.
The Department proposed recovery of ₹16,21,12,454 in allegedly wrongly availed ITC. The petitioner approached the High Court against the separate action seeking to impose a penalty upon him individually.
Challenge to Separate Penalty Proceedings
The petitioner’s principal contention was that the disputed ITC benefit had been availed by the partnership firm, rather than by him in his individual capacity.
His counsel submitted that a show-cause notice had already been issued against the firm for recovery of the disputed credit, with penalty also being pursued. Consequently, there was no justification for initiating separate penalty proceedings against him merely because he was a partner.
The order records the challenged penalty provision as Section 122(1)(A). The petitioner questioned its invocation against him in circumstances where the alleged wrongful benefit belonged to the firm and was already the subject of departmental proceedings.
His challenge therefore focused on the basis for proceeding against him separately.
Partnership Liability Argument
The petitioner relied upon the Supreme Court decision identified in the order as Dhanasihgh Prabhu v. Chandrasekar and Others, Criminal No.5706 of 2024.
Referring to that decision, counsel argued that partners are not distinct from their partnership firm in the same manner as a company and its members. The firm’s liabilities, according to the submission, extend jointly and severally to its partners.
On this basis, the petitioner maintained that proceedings against the firm already addressed the liability arising from its alleged conduct. A separate notice seeking an individual penalty against one partner was therefore challenged as unnecessary.
This was a submission advanced by the petitioner, rather than a final determination of the statutory position by the High Court.
No Admission of Wrongful ITC
The petitioner expressly advanced his argument without admitting that the credit had been wrongly availed.
His position was that, even assuming the Department’s allegation for the purpose of examining the separate penalty action, the benefit would have been received by M/s G. M. Coke Industries, rather than by him individually.
The distinction matters because the proceedings before the Court had not established either the alleged non-receipt of supplies or the resulting inadmissibility of ITC. The figures and transactions discussed in the order formed part of the Department’s allegations, which remained open to examination.
High Court’s Prima Facie Observations
After considering the submissions, pleadings and judgments placed before it, the Court noted that proceedings had been initiated against the partnership firm concerning the allegedly wrongful ITC.
Those proceedings contemplated recovery of the disputed benefit and imposition of penalty. In that setting, the Court observed that separate proceedings against one partner individually did not appear necessary for the benefits allegedly wrongly claimed by the firm.
The observation was made while considering issuance of notice and interim relief. It should therefore be understood as a prima facie assessment, rather than a final ruling that partners can never face separate GST penalties.
Interim Directions and Next Hearing
The High Court issued notice, returnable in four weeks. Since the respondents were represented, formal notices were waived, and the petitioner was directed to furnish extra copies within one week.
The respondents were permitted to obtain instructions and file the necessary affidavit.
The Court made the interim prayer returnable on 9 December 2026 and directed that, until that date, the respondents would not initiate any further action in terms of the show-cause notice. The matter was listed for further consideration on the same date.
Key Takeaway
The order provides interim protection, while leaving the merits of separate partner-level penalty proceedings open for adjudication. It highlights the need to examine the legal basis for an individual penalty where the alleged ITC benefit and existing proceedings concern a partnership firm.
Cases Discussed
- Dhanasihgh Prabhu vs Chandrasekar and Ors, (Criminal) No. 5706 of 2024 (Supreme Court) — cited in petitioner’s submissions concerning joint and several liability of partners; the present interim order does not finally decide the issue.
FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT
1. Heard Dr. A. Saraf, learned senior counsel assisted by Mr. K. Kausik. Also heard Mrs. R. Devi, learned counsel for respondent No.1, Mr. S.C. Keyal, Senior counsel, assisted by Mr. K. Jain appearing for respondent No.2 Mr. S. Chetia, learned counsel for respondent Nos. 3 and 4 and Mr. H. Boruah for respondent Nos. 5 and 6.
2. Petitioner is the partner of M/S G. M. Coke Industries the other partner of the firm is his wife Smt. Shikha Mittal. He is aggrieved by the show-cause notice dated 30.09.2026 whereby the Department has proceeded to impose penalty under Section 122(1)(A) on the ground that the firm, namely, GM Coke Industries had availed of Input Tax Credit without having received the benefits of goods and services of both.
3. Petitioner is registered under the GST No.18AAFFG7194N1ZO with effect from 01.07.2017. Petitioner before this Court is aggrieved by the issuance of the impugned Demand-cum-Show Cause notice dated 30.09.2026 issued by the Joint Director, Directorate General of GST Intelligence, Guwahati Zonal Unit.
4. Dr. Saraf, learned senior counsel, addressing the Court pointed out that the show-cause notice issued contains a clause for imposition of penalty under section 122. The primary allegation against the petitioner is that the petitioner had purportedly availed the Input Tax Credit (ITC) under the cover of invoices and corresponding E-Way bills from 17 suppliers without actually the same being received by the taxpayer. Consequently, the benefit of Input Tax Credit amounting to Rs.16,21,12,454/- which was availed of by the petitioner is proposed to be recovered.
5. The learned counsel for the petitioner submits that the ITC benefits were availed of by the firm, namely M/S GM Coke Industries and Show-Cause notice had already been issued for recovery of the said ITC. However, there is no reason per se for the revenue to proceed for imposition of the penalty under Section 122(1)(A) of the GST Act on the petitioner solely on the ground that he is a partner of the M/S GM Coke Industries.
6. The learned counsel representing the petitioner by referring to the judgment rendered by the Apex Court in Dhanasihgh Prabhu vs Chandrasekar and Ors in (Criminal) No. 5706 of 2024 submits that unlike a company the partners of a firm are not distinct from the partnership firm. Liability of the partnership firm would automatically extend jointly and severally to the partners.
7. Under such circumstances, where the show-cause notice has already been issued against the partnership firm and penalty sought to be imposed on the partnership firm there is no occasion for the Revenue Authorities to proceed individually against one of the partners by imposition of the Show-Cause notice. He further submits that assuming, although not admitting the benefit if at all were wrongly availed of, that this benefit was availed of by the partnership firm and not by the petitioner individually and the partnership firm being proceeded against by the respondent authorities, no separate proceedings are required to be initiated against the partners by issuing the Show-Cause notice and seeking to impose penalty under Section 122(1)(A). Being aggrieved the present writ petition is filed
8. The learned counsel for the petitioner submits that the impugned Show- Cause notice requires interference by the Court and upon showing causes by the respondents, appropriate orders and directions be issued by the Court for interference of the show-cause notice. During the pendency, the ad-interim orders be granted.
9. Having considered the submissions made and having examined the pleadings and the judgments placed it is seen that the proceedings initiated by the respondents against M/S GM Coke Industries which appears to be a partnership, further proceedings in respect of the one of the partners individually for the benefits purportedly wrongly claimed by the partnership firm towards ITC sought to be recovered and for which proceedings are sought to be initiated including imposition of penalty, separate proceedings against one of the partners for such benefits purportedly stated to be wrongly claimed by the partnership firm does not appear to have been necessary in the view of the Court.
10. Issue notice, returnable in 4 (four) weeks.
11. Since the respondents are duly represented by their respective counsel, notices are waived. Extra copies be furnished within a period of one week from today. The respondents may complete their instructions and file necessary affidavit.
12. Issue notice on the interim prayer returnable on 9.12.2026.
13. Till the next returnable date, the respondents will not initiate any further action in terms of the show cause notice.
14. List the matter again on 9.12.2026.
