Liability of Company Directors under Section 122(1A) of CGST Act

Case Title: Gurudas Mallik Thakur v. Commissioner of Central Goods and Service Tax & Anr. and Dinesh Kumar Raghav v. Commissioner of Central Goods and Service Tax & Anr.
Court: High Court of Delhi
Petition Nos.: W.P.(C) 5083/2025 & W.P.(C) 5133/2025
Date of Judgement: 23rd April, 2025
Category of Dispute: Penalty & Liability of Directors – Input Tax Credit and Short Payment of GST
Relevant Sections: Sections 74, 122(1), 122(1A), 125, 50, 107 of the CGST Act, 2017; Section 20 of IGST Act, 2017

Facts of the Case

1. Petitioners, directors of M/s Planman HR Pvt. Ltd., challenged Order-in-Original dated 23.01.2025 arising from SCN issued on 21.04.2023 alleging short payment of GST and wrongful ITC (Para 3–5).

2. The Department found GST short payment of ₹40.61 crore and inadmissible ITC of ₹35.42 lakh by the company; returns were not filed beyond Dec 2018 (Para 6–8).

3. Petitioners claimed that promoter Mr. Arindam Chaudhary (90% shareholder) was decision-maker and that they had resigned in 2020 (Para 9).

4. The adjudicating authority confirmed tax, interest and imposed penalties not only on the company but also individually on the directors under Sections 122(1A) & 125 CGST Act (Para 10).

Questions in Consideration

1. Whether directors of the company, being “non-taxable persons”, can be fastened with liability under Section 122(1A) of the CGST Act? (Para 11–12).

2. Whether the writ petition is maintainable against the Order-in-Original or whether the remedy lies in appeal under Section 107 CGST Act? (Para 18–21).

3. Whether “any person” in Section 122(1A) includes non-taxable persons like directors who may have benefited from GST evasion? (Para 23–27).

Observations of the Court

1. Section 122(1A) extends liability to “any person” who retains benefit of fraudulent ITC transactions, distinct from “taxable person” (Para 23–27).

2. The factual determination of whether directors derived benefit or exercised control is beyond writ jurisdiction and must be examined by Appellate Authority (Para 19, 22, 28–30).

3. Appeal under Section 107 is maintainable by “any person” and not restricted to taxable persons; Petitioners thus have remedy in appeal (Para 21, 31).

4. Petitioners’ contention that they had resigned prior to introduction of Section 122(1A) (01.01.2021) can be raised before Appellate Authority (Para 32–33).

5. Department directed to provide mechanism to enable “non-taxable” directors to file appeals (Para 38–42).

Judgement of the Court

1. Writ petitions dismissed as not maintainable; remedy lies in appeal under Section 107 CGST Act (Para 37–41).

2. Department to communicate mechanism for filing appeal within two weeks; Petitioners to file appeal within 30 days (Para 39–41).

3. Appeal, once filed, shall not be rejected on limitation and will be heard on merits (Para 41).

Between Fine Lines (Simplified Outcome)

• Directors can be penalized under Section 122(1A) if they benefitted from GST fraud.

• “Any person” under law includes non-taxable persons like directors or managers.

• High Court refused to quash penalty but directed Petitioners to file appeal.

• Department must enable non-taxable persons to appeal online or manually.

• Case clarifies that writ petitions are not substitutes for statutory appellate remedies.

Summary of Referred Cases

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”