The Bombay High Court in the case of Shantanu Sanjay Hundekari vs. Union of India ruled that penalties could not be imposed on the employee, as they were neither taxable nor registered.
The petitioner, acting as a taxation manager for a shipping company, was authorized via power of attorney for specific GST matters. Allegations arose during investigations regarding the company's improper utilization and distribution of input tax credit, resulting in a significant demand cum show cause notice. This notice also targeted the petitioner for potential penalties alleging the benefit retention or causing such offences. The petitioner argued that they did not fall under the taxable or registered category according to GST laws, and thus should not be implicated in benefiting from such actions.
Appreciating the petitioner's arguments, the court concluded that penalties under Section 122(1A) of CGST Act could not be applied to the employee, as they neither violated the provisions outlined in Section 122(1) nor retained any benefit. This provision applies exclusively to taxable or registered individuals, which the employee was not.
W&B Comments: Section 122(1) applies to taxable persons, and this extends to subsequent application of Section 122(1A) to taxable persons as well. The Hon’ble Bombay High reaffirmed that Section 122 is invoked particularly when the offence is committed by the individual for personal gain, not because of the position they hold. Invoking Section 137 pertaining to criminal proceedings, in a show cause notice under Section 74 for adjudication renders such proceedings out of jurisdiction.