Personal penalty on director Under GST- Allahabad HC Questions Legality
In a major development, the Allahabad High Court has entertained a writ petition challenging the validity of penalty proceedings under Section 122(1A) of the CGST Act, 2017, imposed on an ex-Director for transactions undertaken during 2018-19.
Key Legal Issues Raised:
Retrospective Application of Law?
Section 122(1A)-which imposes a penalty equivalent to the benefit from a transaction-was introduced only in January 2021 via Notification No. 92/2020 dated December 22, 2020.
The penalty is imposed for transactions of 2018-19, raising serious concerns over retrospective application.
Jurisdictional Challenge:
The Petitioner ceased to be a Director and shareholder of the company before the alleged violations.
HC acknowledged the jurisdictional issue, stating, “Since the point is of jurisdiction, we have entertained this writ petition.”
Interim Relief & Next Hearing:
The HC has not passed a stay order but noted that the Revenue will not take coercive steps against the Petitioner until the next hearing on April 9, 2025.
The prima facie case and balance of convenience favor the Petitioner.
Precedents in Favor?
The Supreme Court in Shantanu Sanjay Hundekari upheld Bombay HC’s decision quashing a ₹3,731 Crore SCN against an employee under Section 122(1A), setting a crucial precedent.
Implications:
This case raises fundamental questions on the scope of personal liability under GST and the potential misuse of retrospective penalty provisions.
The Copy Of the order is as under:
