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TMI Blog2024 (3) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... ffences by taxable person. Such taxable person would render himself liable for a penalty for acts provided in clauses (i) to (xxi) of sub-section (1). Insofar as sub-section (1-A) of Section 122 is concerned, it provides that any person (who would necessarily be a taxable person), retains the benefit of the transactions covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1), and at whose instance, such transaction is conducted, shall be liable to a penalty of an amount equal to the tax evaded or input tax credit availed of or passed on . This necessarily implies that sub-section (1-A) applies to a taxable person, as it specifically speaks about the applicability of the provisions of clauses (i), (ii), (vii) or clause (ix) of sub-section (1), with a further emphasis added by the words - This clearly depicts the intention of the legislature that a person who would fall within the purview of sub-section(1-A) of Section 122 is necessarily a taxable person as defined under section 2(107) of the CGST Act read with the provisions of section 2( 94) of the CGST Act and a person who retains the benefits of transactions covered under clauses (i), (ii), (vii) or clause (ix) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coral Shah i/b. DMD Advocates. For the Respondent nos. 1, 3 and 4 : Mr. M.P. Sharma a/w. Ms. Mamta Omle. For the Respondent no. 2 : Mr. Vishal Thadani, Addl. G.P. in WPL/30198/2023. For the State in WPL/30199/2023 : Ms. Jyoti Chavan, Addl. G.P. For the State in WPL/30200/2023 : Mr. Himanshu Takke, AGP. For State in WPL/30241/2023 : Smt. Jaymala J. Ostwal, Addl. G.P. JUDGMENT (PER G.S. KULKARNI, J.) 1. Rule. Returnable forthwith. Respondents waive service. By consent of the parties, heard finally. 2. These are four petitions which involve a common challenge. The facts in all these petitions are similar, hence they can be disposed of by this common judgment. 3. At the outset we may state that this case before the Court is quite peculiar unto itself. The petitioners in each of these petitions are individuals. They are employees of a shipping company, who have been foisted with a show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 whereupon a demand of Rs. 3731,00,38,326/- towards penalty is being demanded from them being the tax amount stated to be defaulted by the employer. 4. Thus briefly the challenge as mounted in these petitions is to the demand cum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersk. It is also alleged that there was wrongful distribution of ITC by Maersk and that Maersk had legitimately claimed the credit after making payments that included GST to third party vendors. 8. The petitioner has categorically contended that there was no question of the petitioner personally availing the benefit of any ITC, nor does the show cause notice allege that any personal benefit is achieved by the petitioner. It is contended that the show cause notice making such allegations against Maersk incidentally invokes the provisions of Section 122(1A) and Section 137 of the CGST Act so as to threaten imposition of penalty of Rs. 3731 crores on the petitioner and to initiate prosecution against the petitioner, who is an individual. It is thus the petitioner s case that the said provisions of the CGST Act, as invoked, per se do not apply to the petitioner, absent a suggestion that any personal benefit was availed by the petitioner. 9. The petitioner contends that MLIPL had entered into an Agency Agreement dated 1 August, 2011 ( Agreement ) with one AP Moller Maersk to act as its Steamer Agent in the territory of India and Nepal. The said Agreement was novated in favour of Maersk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. It is stated that he had accordingly appeared on six different occasions from 2 December, 2021 upto May 9, 2023, and had tendered six statements. 13. It is the petitioner s case that the petitioner was not the decision making authority on Maersk's businesses, and was not in-charge of or responsible for the business of Maersk, as the petitioner is in India and was merely representing Maersk before respondent No. 3 to provide factual information and data as requested by respondent from time to time. It is also contended that as a matter of fact, the legal issues which were put to the Petitioner were replied by the petitioner as per the legal opinion obtained by Maersk. Also, the petitioner was neither a legal expert nor had any in-depth legal understanding of GST laws or its interpretation. Thus, the role of the petitioner was essentially to assist and cooperate with the investigation authorities and had given clarifications relating to distribution of input tax credit, legitimately taken by Maersk on payments made to third party vendors on procurement of services. 14. It is hence the petitioner s contention that the investigations ultimately led to the issuance of the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and proceedings leading to the issuance of Show Cause Notice dated 19.09.2023 (Exhibit A) and, after examining their validity and propriety, quash and set aside the SCN; 17. Mr. Harish Salve, learned senior counsel for the petitioners in support of the reliefs as prayed for in the petition, has made the following submissions: (i) The impugned show cause notice as issued to the petitioner is wholly arbitrary and illegal, inasmuch as, in foisting on the petitioner a penalty of Rs. 3,731 crores purportedly under section 122(1A) of the CGST Act, the basic ingredients of the said provision are not satisfied, as there was no material to the effect that primary benefit of the ITC was in any manner availed by the petitioner. The show cause notice is thus an abuse of the powers vested with the concerned officer, which is in fact designed to threaten and intimidate junior employees of the company, so that they do not assist the assessee in the proceedings initiated by the respondents. (ii) The petitioner is merely a power of attorney holder of Maersk. In such situation it was arbitrary for the respondent that such a grossly disproportionate penalty of Rs. 3731 crores could at all be foist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and as to how the alleged benefit was accrued through the transactions conducted by the petitioner. The impugned show cause notice is not only an abuse of the process of law but it is violative of Articles 21, 14 and 19(1)(g) of the Constitution. It would thus deserve to be quashed and set aside. 18. On the other hand, Mr. Sharma, learned counsel for the respondents has made submissions supporting the impugned show cause notice. He relies on the reply affidavit of Mr. Shyam Kanu Mahanta, Additional Director General, DGGI, Ahmedabad Zonal Unit. At the outset, Mr. Sharma would submit that the petitioner needs to respond to the show cause notice by raising all such contentions. Hence, the show cause notice needs to be taken forward and adjudicated. For such reason, the writ petition is not maintainable and would deserve rejection. 19. It is Mr. Sharma s submission that the allegation in the show cause notice would show that there was responsibility fastened on the petitioner in regard to the affairs of Maersk, hence, the petitioner cannot disown his involvement in the loss of revenue in the manner as described in the show cause notice. He refers to the contents of paragraphs 9 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act, 2017, Punjab GST Act, 2017, Karnataka GST Act, 2017, Kerala GST Act, 2017 and Telangana GST Act, 2017 read with Section 20 of the IGST Act, for the contraventions of the provisions of the CGST Act, 2017 and like provisions of the Maharashtra GST Act, 2017, Gujarat GST Act, 2017, Haryana GST Act, 2017, Tamilnadu GST Act, 2017, Andhra Pradesh GST Act, 2017, West Bengal GST Act, 2017, Punjab GST Act, 2017, Karnataka GST Act, 2017, Kerala GST Act, 2017 and Telangana GST Act, 2017 read with Section 20 of the IGST Act, 2017, as M/s Maersk (Noticee No. 1 to Noticee No. 10) have committed offences as discussed in Para 5.19.1 and in paras of this notice supra and as to why he should not be proceeded against for indulging into offences of the nature as prescribed under Section 137 of the CGST Act, 2017 and like provisions of the Maharashtra GST Act, 2017, Gujarat GST Act, 2017, Haryana GST Act, 2017, Tamilnadu GST Act, 2017, Andhra Pradesh GST Act, 2017, West Bengal GST Act, 2017, Punjab GST Act, 2017, Karnataka GST Act, 2017, Kerala GST Act, 2017 and Telangana GST Act, 2017 read with Section 20 of the IGST Act, 2017 for willful suppression of the facts resulting in huge evasion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplies are incorrect and ITC availed and subsequently utilized is inadmissible and thereby, they aided and abetted in commission of offences as described above in Para 5.3 to Para 5.18 of this notice supra and thereby, they have rendered themselves liable to penalty equivalent to the tax evaded by M/s Maersk amounting to Rs. 3731,00,38,326/ (Rs. 1561,03,97,298 + Rs. 1561,03,97,298 + Rs. 608,92,43,730/-) as discussed in table (iv) of Para 6.1.2, table of Para 6.2.6 and table of Para of 7.3.5 respectively, under Section 122(1A) of the CGST Act, 2017 and like provisions of the Maharashtra GST Act, 2017, Gujarat GST Act, 2017, Haryana GST Act, 2017, Tamilnadu GST Act, 2017, Andhra Pradesh GST Act, 2017, West Bengal GST Act, 2017, Punjab GST Act, 2017, Karnataka GST Act, 2017, Kerala GST Act, 2017 and Telangana GST Act, 2017 and further read with Section 20 of the IGST Act, 2017 for the violation of provisions of CGST Act, 2017 and the rules made thereunder and like provisions of the Maharashtra GST Act, 2017, Gujarat GST Act, 2017, Haryana GST Act, 2017, Tamilnadu GST Act, 2017, Andhra Pradesh GST Act, 2017, West Bengal GST Act, 2017, Punjab GST Act, 2017, Karnataka GST Act, 2017, Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be proceeded against for indulging into offences of the nature as prescribed under Section 137 of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017, for willful suppression of the facts resulting in evasion of GST by Mearsk. In such context, it is alleged that the petitioner has committed offences, of the nature as described under the provisions of Sections 122(1)(i) of the CGST Act, 2017, which led to the evasion of the GST by Maersk, for the reason that the invoices raised by Maersk on its supplies were not in accordance with the provisions of Section 31 of the CGST Act, 2017 read with Rule 47 of the CGST Rules, 2017 read with Section 13 of the CGST Act, 2017 and further read with Section 20 of the IGST Act, 2017 and the rules made thereunder. It is also alleged that the ITC availed and subsequently utilized on the strength of the invoices raised belatedly by Maersk were inadmissible in terms of the provisions of Section 13, Section 16(2), Section 16(4), Section 17(5)(1) and Section 31 of the CGST Act, 2017 and the rules made thereunder, read with Section 20 of the IGST Act, 2017, as detailed in the impugned show cause notice. It is also alleged that the invoices r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 10 companies. 24. On the above conspectus, the question before the Court is whether the invocation of the provisions of Section 122 (1-A) of the CGST Act as also Section 137(1) and 137(2) would stand attracted in their applicability to the petitioner, so as to confer jurisdiction on respondent no. 3, to issue the impugned show cause notice against the petitioner, who is merely an employee of MLIPL and a power of attorney of Maersk. Such issue according to the petitioner, goes to the root of the show cause notice. 25. To appreciate the contentions as urged on behalf of the petitioner, it would be necessary to note the relevant provisions namely Section 2(94) and Section 2(107), Section 122 (1-A) and Section 137 of the CGST Act. For convenience, these provisions are extracted hereunder :- Section 2(94) ―registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number; Section 2(107) ―taxable person means a person who is registered or liable to be registered under section 22 or section 24; Section 122. Penalty for certain offences - (1) Where a taxable person who (i) supplies any goods or services or both w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act; (xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (xix) issues any invoice or document by using the registration number of another registered person; (xx) tampers with, or destroys any material evidence or document; (xxi) disposes off or tampers with any goods that have been detained, seized, or attached under this Act, shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher. (1-A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf liable for a penalty for acts provided in clauses (i) to (xxi) of sub-section (1). Insofar as sub-section (1-A) of Section 122 is concerned, it provides that any person (who would necessarily be a taxable person), retains the benefit of the transactions covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1), and at whose instance, such transaction is conducted, shall be liable to a penalty of an amount equal to the tax evaded or input tax credit availed of or passed on . This necessarily implies that sub-section (1-A) applies to a taxable person, as it specifically speaks about the applicability of the provisions of clauses (i), (ii), (vii) or clause (ix) of sub-section (1), with a further emphasis added by the words as underscored by us. This clearly depicts the intention of the legislature that a person who would fall within the purview of sub-section(1-A) of Section 122 is necessarily a taxable person as defined under section 2(107) of the CGST Act read with the provisions of section 2( 94) of the CGST Act and a person who retains the benefits of transactions covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) of Section 122. 27. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is correct in its contention as raised in the show cause notice that the said provisions are applicable to an individual like the petitioner (when they are not), there is no material that it is at the instance of petitioner, transactions are conducted, so as to make the petitioner liable for such a penalty, that too of an amount equivalent to the tax alleged to be evaded or ITC availed or passed on. Thus, there is no material to support that any of the ingredients as specified in sub-section (1-A) of Section 122 would stand attracted so as to confer jurisdiction on respondent no. 3 to adjudicate any allegations/charges as made under sub-section (1-A) of Section 122. This is abundantly clear from the bare contents of paragraphs 20 and 5.19.1 of the show cause notice as noted by us hereinabove. 30. Similar is the position insofar as the applicability of Section 137 of CGST Act is concerned. Section 137 concerns Offences by Companies . Sub-section (1) thereof would provide that when an offence committed by a person under the CGST Act is a company, every person who, at the time of the offence being committed, was in charge of and was responsible, to the company for the conduct of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 122 and Section 137, of the CGST Act any principle of vicarious liability being attracted. There could be none. Thus, Respondent no. 3 clearly lacks jurisdiction to adjudicate the show cause notice in its applicability to the petitioner. Thus qua the petitioner, the impugned show cause notice is rendered bad and illegal, deserving it to be quashed and set aside. 33. The foregoing discussion would also lead us to conclude that it is highly unconscionable and disproportionate for the concerned officer of the Revenue to demand from the petitioner an amount of Rs. 3731 crores, which in fact is clearly alleged to be the liability of Maersk, as the contents of the show cause notice itself would demonstrate. The petitioner would not be incorrect in contending that the purpose of issuing the show cause notice to the petitioner who is merely an employee, was designed to threaten and pressurize the petitioner. 34. It is clarified that the observations as made by us in this judgment are confined and are applicable in the context of the show cause notice issued to the petitioner and are no expression of any opinion, on the applicability of the show cause notice to any other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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