{"id":387174,"date":"2026-06-15T18:00:45","date_gmt":"2026-06-15T12:30:45","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=387174"},"modified":"2026-06-15T17:51:05","modified_gmt":"2026-06-15T12:21:05","slug":"applicability-of-section-1221a-cgst-act","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/06\/15\/applicability-of-section-1221a-cgst-act\/","title":{"rendered":"Gauhati HC disagrees with Bombay HC on Section 122(1-A), CGST Act; Holds partners liable to penalty for GST-Evasive transactions, including pre-2021 period"},"content":{"rendered":"<style>\n.animate-charcter{background-image: linear-gradient(-225deg, #231557 0%, #44107a 29%, #ff1361 67%, #fff800 100%); background-size: 200% auto; -webkit-background-clip: text; -webkit-text-fill-color: transparent; animation: textclip 0s linear infinite;}\n@keyframes textclip {to {background-position: 200% center;}}\n<\/style>\n<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Disclaimer:<\/span> <span style=\"font-style: italic;\">This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.<\/span><\/p>\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Gauhati High Court:<\/span> In 2 writ petitions challenging penalty proceedings against 2 partners of Quantum Infratech under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Central Goods and Services Tax Act, 2017<\/a> (the Act), a Single Judge Bench of Devashis Baruah, J., held that liability under the provision is not confined to a &#8220;taxable person&#8221; but extends to any person who retained the benefit of transactions covered under Section 122(1) and at whose instance such transactions were conducted. Holding that Section 122(1-A) is complementary to Section 122(1) and merely identifies the person responsible for, and benefiting from, such violations, the Court ruled that the provision could be applied even in relation to transactions predating its enforcement on 1 January 2021.<\/p>\n<h3>Background<\/h3>\n<p style=\"margin-bottom: 3%;\">Quantum Infratech, a partnership firm engaged in construction activities, was subjected to GST proceedings alleging suppression of turnover, supply of services without issuance of invoices, availment of ineligible input tax credit, and other violations under the CGST Act. A show-cause notice dated 3 August 2024 was issued to the firm, its partners , and another notice under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534819\" target=\"_blank\">74(1)<\/a>, read with Sections <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> and <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(3)<\/a>(<span style=\"font-style: italic;\">a<\/span>) of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">the Act<\/a>.<\/p>\n<p style=\"margin-bottom: 3%;\">The adjudicating authority, by Order-in-Original dated 4 February 2025, held that the partners had retained the benefit of the impugned transactions and that such transactions were conducted at their instance. Accordingly, penalties under Section 122(1-A) were imposed upon them. The appeals preferred by the partners were dismissed by the appellate authority through Order-in-Appeal dated 26 August 2025.<\/p>\n<p style=\"margin-bottom: 3%;\">Aggrieved, the partners approached the High Court contending that Section 122(1-A) could not be invoked against them as they were not the &#8220;taxable person&#8221;, and that the provision could not be applied to transactions pertaining to the period prior to 1 January 2021.<\/p>\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Also Read:<\/span> <a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/06\/08\/rajasthan-hc-upholds-gst-demand-against-concessionaire-sub-contracting-does-not-extinguish-tax-liability\/\" target=\"_blank\">Rajasthan HC Upholds GST Demand Against Concessionaire; Holds Sub-Contracting Does Not Extinguish Tax Liability<\/a><\/p>\n<h3>Analysis<\/h3>\n<p>The Court decided 2 points for determination, in the present proceedings, which are:-<\/p>\n<ol style=\"list-style-type: decimal;\">\n<li>\n<p style=\"font-weight: bold;\">Whether the petitioners in both the writ petitions who are admittedly partners of Quantum Infratech (the taxable person) can be imposed penalty under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a>?<\/p>\n<\/li>\n<p style=\"margin-bottom: 3%;\">The Court after doing a conjoint reading of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534759\" target=\"_blank\">2(84), (107) and (94)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a>, observed that <span style=\"font-weight: bold;\">&#8220;person&#8221;<\/span> would include various entities whereas a <span style=\"font-weight: bold;\">&#8220;taxable person&#8221;<\/span> is a person who is liable to be registered under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534762\" target=\"_blank\">22<\/a> or Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534764\" target=\"_blank\">24<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a> and includes a registered person whereas a <span style=\"font-weight: bold;\">&#8220;registered person&#8221;<\/span> is a person who is registered under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534765\" target=\"_blank\">25<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a>.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court analysed Section 122 and observed that while Section 122(1) specifically imposes penalty on a &#8220;taxable person&#8221; for the violations enumerated in clauses (<span style=\"font-style: italic;\">i<\/span>) to (<span style=\"font-style: italic;\">xxi<\/span>), Section 122(1-A) employs the wider expression &#8220;any person&#8221; in relation to transactions covered under clauses (<span style=\"font-style: italic;\">i<\/span>), (<span style=\"font-style: italic;\">ii<\/span>), (<span style=\"font-style: italic;\">vii<\/span>) and (<span style=\"font-style: italic;\">ix<\/span>) of Section 122(1). The Court noted that a person would fall within the ambit of Section 122(1-A) only if 2 conditions are satisfied: first, such person has retained the benefit of the impugned transaction, and second, the transaction was conducted at that person&#8217;s instance. The Court further observed that identification of such person arises only after adjudication of the violations committed by the taxable person under Section 122(1).<\/p>\n<p style=\"margin-bottom: 3%;\">Examining the scheme of Section 122, the Court noted that sub-sections (1), (1-A), (2) and (3) deliberately employ different expressions such as &#8220;taxable person&#8221;, &#8220;registered person&#8221; and &#8220;any person&#8221;, reflecting the legislature&#8217;s intention to identify distinct categories of persons liable for penalty. The Court held that the placement of Section 122(1-A) immediately after Section 122(1) was significant and indicated a legislative intent to specifically target persons who retain the benefit of transactions and at whose instance such transactions are carried out by the taxable person. Consequently, Section 122(1-A) encompass both a registered person as well as a person who is liable to be registered under the Act.<\/p>\n<p>The Court rejected the petitioners&#8217; contention, based on the Bombay High Court decisions in <span style=\"font-style: italic;\">Shantanu Sanjay Hundekari<\/span> v. <span style=\"font-style: italic;\">Union of India<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/L2li3109\" target=\"_blank\">2024 SCC OnLine, Bom 929<\/a> and <span style=\"font-style: italic;\">Amit Manilal Haria<\/span> v. <span style=\"font-style: italic;\">Joint Commissioner, CGST and Central Excise<\/span><a href=\"http:\/\/www.scconline.com\/DocumentLink\/9x4pm5UJ\" target=\"_blank\">, 2026 SCC OnLine Bom 1510<\/a>, that only a taxable person could commit the violations contemplated under Section 122(1)(<span style=\"font-style: italic;\">i<\/span>), (<span style=\"font-style: italic;\">ii<\/span>), (<span style=\"font-style: italic;\">vii<\/span>) and (<span style=\"font-style: italic;\">ix<\/span>). The Court opined that such an interpretation was very narrow particularly in respect of the definition of &#8220;person&#8221;, &#8220;taxable person&#8221; and &#8220;registered person&#8221;. The Court observed companies, LLPs, partnership firms and other juridical persons necessarily act through natural persons and cannot independently carry out such acts. The Court opined that,<\/p>\n<p class=\"animate-charcter\" style=\"margin-left: 36pt; margin-bottom: 3%; font-weight: bold;\">&#8220;<span style=\"font-style: italic;\">The proposition of law laid down by the Division Bench of the Bombay High Court in Shantanu Sanjay and Amit Manilal Haria if accepted, it would render the provision of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a>, otiose and nugatory<\/span>.&#8221;<\/p>\n<p style=\"margin-bottom: 3%;\">The Court found support for this view in the Delhi High Court&#8217;s decision in <span style=\"font-style: italic;\">Gurudas Mallik Thakur<\/span> v. <span style=\"font-style: italic;\">Commr. (CGST)<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/HrCDI0u6\" target=\"_blank\">2025 SCC Online Del 3108<\/a>.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court noted that the petitioners had not denied the allegations of the show-cause notice dated 3 August 2024. The Court observed that the Order-in-Original dated 4 February 2025 recorded findings that the impugned transactions were carried out at the petitioners&#8217; instance and that they had retained the benefits arising therefrom, which findings were subsequently affirmed by the appellate authority. In view of these concurrent findings, the Court opined that both conditions prescribed under Section 122(1-A) stood satisfied. Accordingly, the petitioners were held to fall within the ambit of Section 122(1-A) CGST Act and were liable to penalty thereunder.<\/p>\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Also Read:<\/span> <a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/06\/01\/no-gst-notice-or-assessment-against-non-existent-entity-post-amalgamation-bombay-hc\/\" target=\"_blank\">No GST Notice or Assessment Against Non-Existent Entity Under Section 87, CGST Act; Liabilities to be Borne by Amalgamated Entity: Bombay High Court<\/a><\/p>\n<li>\n<p style=\"font-weight: bold;\">In the circumstance, the point for Determination No. 1 is decided against the petitioners, whether the provisions of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a> can be applied for the period prior to 1 January 2021 which is the date of coming into force of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">Act of 2017<\/a>?<\/p>\n<\/li>\n<p style=\"margin-bottom: 3%;\">The Court examined the divergent views of the Bombay and Delhi High Courts on the applicability of Section 122(1-A) to transactions undertaken prior to its introduction on 1 January 2021. While the Bombay High Court in <span style=\"font-style: italic;\">Amit Manilal Haria<\/span> held that Section 122(1-A) could not be retrospectively applied to transactions predating its enactment, relying on Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001574938\" target=\"_blank\">20(1)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\">Constitution<\/a>, the Delhi High Court in <span style=\"font-style: italic;\">Bhupender Kumar<\/span> v. <span style=\"font-style: italic;\">Commr. (CGST), <a href=\"http:\/\/www.scconline.com\/DocumentLink\/4TUv8ZG8\" target=\"_blank\">2025 SCC OnLine Del 4848<\/a><\/span>, held that the applicability of the provision would be governed by the date of the show-cause notice and that it could be invoked where the notice was issued after Section 122(1-A) came into force.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court noted the pendency of the issue before the Supreme Court in <span style=\"font-style: italic;\">Mukesh Kumar Garg<\/span> v. <span style=\"font-style: italic;\">Union of India<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/f6z25Ou5\" target=\"_blank\">2025 SCC OnLine Del 3324<\/a>, where leave had been granted and recovery stayed subject to deposit of 25 per cent of the demand. Proceeding to independently examine, whether Section 122(1-A) required retrospective application or whether there is any requirement to apply Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">the Act of 2017<\/a> retrospectively. The Court found that Section 122(1-A) does not create any independent violation, nor does it enlarge the scope of violations already contemplated under Section 122(1), which has existed since the inception of the Act. The Court observed that the phrase <span style=\"font-weight: bold;\">&#8220;retains the benefit of a transaction&#8221;<\/span> under Section 122(1-A) clearly links the penalty to the violations specified in clauses (<span style=\"font-style: italic;\">i<\/span>), (<span style=\"font-style: italic;\">ii<\/span>), (<span style=\"font-style: italic;\">vii<\/span>) and (<span style=\"font-style: italic;\">ix<\/span>) of Section 122(1), which have existed since the inception of the Act. It held that Section 122(1-A) does not create any new violation and so consequently, the question of retrospectively applying Section 122(1-A) does not arise.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court held that Section 132 concerns <span style=\"font-weight: bold;\">criminal offences<\/span>, whereas Section 122 deals with civil penalties for the violations enumerated in Section 122(1). It observed that even assuming Section 122(1-A) were to be applied retrospectively, the bar under Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001574938\" target=\"_blank\">20(1)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\">Constitution<\/a> would not automatically be attracted, as that provision applies to convictions and punishments for offences. Disagreeing with the Bombay High Court&#8217;s view in <span style=\"font-style: italic;\">Amit Manilal Haria<\/span>, the Court opined that the Bombay High Court failed to take note of the difference between an offence and penalty in respect to a civil adjudication while applying Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001574938\" target=\"_blank\">20(1)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\">Constitution<\/a>, and relied upon <span style=\"font-style: italic;\">Jawala Ram<\/span> v. <span style=\"font-style: italic;\">State of Pepsu<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/yDvixv14\" target=\"_blank\">1961 SCC OnLine SC 47<\/a>.<\/p>\n<p style=\"margin-bottom: 3%;\">Analysing the issue from different angle the Court found that Section 122(1-A) is complementary to Section 122(1) and can operate only after the adjudication of violations under clauses (<span style=\"font-style: italic;\">i<\/span>), (<span style=\"font-style: italic;\">ii<\/span>), (<span style=\"font-style: italic;\">vii<\/span>) and (<span style=\"font-style: italic;\">ix<\/span>) of Section 122(1) by the taxable person, and thus under such circumstances, the issue of its retrospective application does not arise. The Court, however, clarified that Section 122(1-A) must be in force on the date of issuance of the show-cause notice, and concurred with <span style=\"font-style: italic;\">Bhupender Kumar<\/span>. Accordingly, the application of Section 122(1-A) to the petitioners was upheld.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court clarified that its examination was confined to the <span style=\"font-weight: bold;\">jurisdictional issues<\/span> raised by the petitioners and did not extend to the <span style=\"font-weight: bold;\">quantum of penalty<\/span> imposed upon them. Since the firm, M\/S Quantum Infratech, had already been granted liberty to approach the Appellate Tribunal in connected proceedings, the petitioners were similarly permitted to avail the statutory remedy under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534689\" target=\"_blank\">112<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">the Act<\/a>. The Court further kept open the factual questions as to whether the petitioners had retained the benefits of the transactions and whether the transactions were carried out at their instance, observing that these issues could be agitated before the Appellate Tribunal.<\/p>\n<\/ol>\n<h3>Decision<\/h3>\n<p>The Court disposed of the petition with the following observations and directions:-<\/p>\n<ol style=\"list-style-type: decimal;\">\n<li>\n<p>The petitioners would be liable to penalty under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">the Act<\/a> unless the factual findings recorded by the proper officer in the Order-in-Original dated 4 February 2025, and as well by the appellate authority in the Order-in-Appeal dated 26 August 2025, are interfered by the Appellate Tribunal.<\/p>\n<\/li>\n<li>\n<p>Section 122(1-A) would apply to the petitioners in respect of transactions falling under clauses (<span style=\"font-style: italic;\">i<\/span>), (<span style=\"font-style: italic;\">ii<\/span>), (<span style=\"font-style: italic;\">vii<\/span>) and (<span style=\"font-style: italic;\">ix<\/span>) of Section 122(1), even for the period prior to coming into effect of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002534700\" target=\"_blank\">122(1-A)<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002896482\" target=\"_blank\">the Act<\/a>.<\/p>\n<\/li>\n<li>\n<p>The Court granted the petitioners liberty to file appeals before the Appellate Tribunal within 30 days and directed that, if filed within the stipulated period, the Tribunal shall consider the appeals on merits without raising any objection on the ground of limitation.<\/p>\n<\/li>\n<li>\n<p style=\"margin-bottom: 3%;\">If the petitioners file their appeals before the Appellate Tribunal within the prescribed period of 30 days, the interim order so passed in the writ proceedings, restraining coercive action against them, shall continue until the stay application are taken up for consideration by the Appellate Tribunal.<\/p>\n<\/li>\n<\/ol>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\"><span style=\"font-style: italic;\">Mayank Bansal<\/span> v. <span style=\"font-style: italic;\">Union of India<\/span>, WP(C)\/24\/2026, decided on 8-6-2026<\/span>]<\/p>\n<hr\/>\n<p>Advocates who appeared in this case:<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For the petitioner:<\/span> B. Raichandani, Advocate<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For the respondent:<\/span> S. C. Keyal, Senior Advocate, CGST, K. Jain, Advocate<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">The legislative intent behind Section 122(1-A) of the Act of 2017 is solely to identify the person at whose instance the violations took place and if the person had retained the benefits, the person would be liable to a penalty as mentioned therein.<\/p>\n","protected":false},"author":67011,"featured_media":387180,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,10],"tags":[15121,59223,107116,35205,107121,25464,49013,107122,107123,44000,99433,43128,107119,107117,20761,107118,107120,3103,95077],"class_list":["post-387174","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-15121","tag-central-excise","tag-central-excise-and-customs","tag-central-goods-and-services-tax-act","tag-cgst-act-penalty","tag-gauhati-high-court","tag-goods-and-service-tax","tag-gst-evasion-penalty","tag-indirect-tax-litigation-india","tag-order-in-appeal","tag-order-in-original","tag-partnership-firm","tag-partnership-liability","tag-registered-person","tag-retrospective-operation","tag-section-1221a","tag-section-1221a-cgst-act","tag-Tax_evasion","tag-taxable-person"],"yoast_head":"<!-- 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