The Bombay High Court while staying the demand prima facie held that penalty under section 122 (1A) of the Central Goods and Service Tax Act (CGST Act) cannot be imposed prior to 1st January 2021.
The bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla has observed that Section 122 (1A) was brought on the statute book only with effect from 1st January 2021 and yet penalty is sought to be imposed on the Petitioners for a period much prior thereto.
The petitioner has challenged the Order to the extent it has been issued to the Petitioners. By the Order, a penalty of approx. Rs.133 crores has been demanded from the three Petitioners namely Chief Financial Officer, Chief Executive Officer, Director and Joint Managing Director of the Shemaroo Entertainment Limited.
The Petitioners challenged the order on three grounds.
Firstly, the liability is foisted on the Petitioners by virtue of the provisions of Section 122 (1A) which was brought into force from 1st January 2021. However, the show cause notice proposed to impose a penalty on the Petitioners for the period starting from July 2017 to March 2022. Assuming everything to be correct, no penalty could have been demanded for any period prior to 1st January 2021, as the provision is prospective in nature.
Secondly, in any event, the Order goes beyond the show cause notice inasmuch as the show cause notice relates to the period from July 2017 to March 2022, but the Order relates to the period July 2017 to July 2023. In other words, the Order goes beyond the show cause notice.
Thirdly, in any event, for Section 122 (1A) to apply, the Petitioners have to be taxable persons, and who have retained the benefit of a transaction covered under clauses (i), (ii), (vii) or (ix) of sub-section (1) of Section 122, and at whose instance such transaction was conducted. The Petitioners are not taxable persons and in law could never retain any benefit of any transaction covered under the clauses.
The court whil listing the matter on 10th June 2025, directed that the Affidavit in Reply shall be filed within a period of two weeks from today and a copy of the same shall be served on the Advocates for the Petitioners. If the Petitioners wants to file any Affidavit in Rejoinder, they may do so within a period of one week from the date of service of the Affidavit in Reply on them.
The court found a strong prima facie case and the balance of convenience is in favour of the Petitioners.
The court granted ad-interim relief by pending the hearing and final disposal of this Petition, the department by themselves, their officers, subordinates, servants and agents be directed not to act on or in consequence of the Order to the extent it has been passed against the Petitioners. The court directed the department not to take any coercive steps in any manner, in consequence of, or in relation to the Order to the extent it has been passed against the Petitioners.
Case Details
Case Title: Mr.Amit Manilal Haria Versus The Joint Commissioner of CGST & CE & Ors.
Case No.: Writ Petition No.5001 Of 2025
Date: April 16, 2025
Counsel For Appellant: Advocate Abhishek Rastogi
Counsel For Respondent: Advocate Ram Ochani
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