GST UPDATEZ ON 24-06-2026 by R.SRIVATSAN, IRS, NACIN, CHENNAI
The dispute in Mayank Bansal v. Union of India & Ors. [WP(C) No. 24 of 2026, Gauhati High Court, decided on June 8, 2026] revolved the subject dispute
whether partners of a partnership firm could be personally penalized under Section 122(1A) of the CGST Act, 2017 for tax evasion committed by the firm ?
The petitioners, being partners of the firm, challenged the imposition of personal penalties, arguing that liability should rest only with the taxable entity the firm itself and not extend to individual partners.
The controversy arose when the Directorate General of GST Intelligence (DGGI) issued a show cause notice alleging that the firm had engaged in fraudulent transactions and evasion of GST on supplies made between 2017 and 2023. The authorities invoked Section 74(1) for tax evasion, read with Section 122(1A), which provides that any person who retains the benefit of such transactions or at whose instance they are conducted shall be liable to penalty.
The petitioners contended that since Section 122(1A) was inserted only with effect from January 1, 2021, it could not be applied retrospectively to transactions prior to that date.
The penalty provisions under the CGST Act were central to the dispute. Section 122(1) already listed offences such as issuing invoices without supply, wrongful availment of ITC, and tax evasion. Section 122(1A), introduced later, extended liability to natural persons—partners, directors, or officers, who benefited from or directed such fraudulent transactions. The petitioners argued that this *amounted to creating a new offence and imposing retrospective liability, which was unconstitutional.
On the other hand, the Revenue authorities maintained that Section 122(1A) was merely clarificatory in nature. They argued that the offences under Section 122(1) existed since the inception of the CGST Act, and Section 122(1A) only identified the natural persons responsible for those offences. The term “any person”, they contended, was deliberately broader than “taxable person” under Section 2(107), thereby covering partners and officers who orchestrated or benefited from fraudulent transactions.
The Court’s decision upheld the Revenue’s stance. It ruled that the expression “any person” in Section 122(1A) was not confined to a taxable person but extended to partners and officers of a firm.
The Court emphasized that Section 122(1A) did not create a new offence but only clarified who could be held personally liable for existing violations under Section 122(1). Consequently, the provision could be applied to transactions prior to its insertion too. The writ petition was dismissed, and the personal penalties imposed on the partners were upheld.
Well……
The final takeaway from this judgment is significant. The partners of a firm cannot escape liability by hiding behind the firm’s separate legal identity.
The Gauhati High Court has made it clear that natural persons who benefit from or direct fraudulent GST practices can be personally penalized under Section 122(1A), even for periods before January 1, 2021.
This ruling strengthens enforcement under GST law by ensuring accountability of individuals behind tax evasion schemes, thereby closing loopholes that allowed firms to shield their partners from personal liability.
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