Section 122(1A) CGST Act imposes penalty only on taxable persons retaining benefits of specified transactions conducted at their instance; inapplicable to mere employees without such findings or taxable status; no retrospective application pre-effective date.

JUDGMENT :

G. S. Kulkarni, J.

1. This petition under Article 226 of the Constitution of India challenges an order-in-original dated 1 February 2025 whereby the show cause notice dated 2 August 2024 issued to the petitioners by the Joint Commissioner (AE), CGST & C.Ex. Mumbai East, in the proceedings of one ‘M/s. Shemaroo Entertainment Limited’, has been confirmed not only against the said entity but also against the petitioners who are the Chief Financial Officer, Chief Executive Officer and Director and Joint Managing Director respectively, being the employees of the said entity, to the extent that the petitioners have been ordered with a penalty of Rs.1,33,60,60,889/- each. The operative portion of the impugned order passed against the petitioners is required to be noted which reads thus:

“(F). In respect of Shri, Atul Hirji Mara, Joint Managing Director; Shri, Hiren Gada, Chief Executive Officer, and Shri, Amit Haria, Chief Financial Officer of M/s. Shemaroo Entertainment Limited

(i) I impose penalty amounting to Rs. 1,33,60,60,889/- (Rupees One hundred thirty three crores sixty lakh sixty thousand eight hundred and eighty nine only) (inadmissible Input Tax Credit (ITC) availed amounting to Rs. 70,25,61,996/-(CGST of Rs. 35,12,80,998/- & SGST of Rs. 35,12,80,998/-) and ineligible ITC passed on amounting to Rs. 63,34,98,893/- (CGST of Rs. 31,67,49,446/- & SGST of Rs. 31,67,49,446/-)) on Shri, Atul Hirji Maru, Joint Managing Director of M/s Shemaroo Entertainment Limited of an amount equivalent to the fake input- tax credit availed of or passed on, under Section 122(1A) of the CGST Act, 2017 and MGST Act, 2017;

(ii) I impose penalty amounting to Rs. 1,33,60,60,889/- (Rupees One hundred thirty three crores sixty lakh sixty thousand eight hundred and eighty nine only) (inadmissible Input Tax Credit (ITC) availed amounting to Rs. 70,25,61,996/-(CGST of Rs. 35,12,80,998/- & SGST of Rs. 35,12,80,998/-) and ineligible ITC passed on amounting to Rs. 63,34,98,893/- (CGST of Rs. 31,67,49,446/- & SGST of Rs. 31,67,49,446/-)) on Shri, Hiren Gada, Chief Executive Officer of M/s Shemaroo Entertainment Limited of an amount equivalent to the fake input tax credit availed of or passed on, under Section 122(1A) of the CGST Act, 2017 and MGST Act, 2017;

(iii) I impose penalty amounting to Rs. 1,33,60,60,889/- (Rupees One hundred thirty three cGaramond Classicorores sixty lakh sixty thousand eight hundred and eighty nine only) (inadmissible Input Tax Credit (ITC) availed amounting to Rs. 70,25,61,996/-(CGST of Rs. 35,12,80,998/- & SGST of Rs. 35,12,80,998/-) and ineligible ITC passed on amounting to Rs. 63,34,98,893/- (CGST of Rs. 31,67,49,446/- & SGST of Rs. 31,67,49,446/-)) on Shri, Amit Haria, Chief Financial Officer of M/s Shemaroo Entertainment Limited of an amount equivalent to the fake input tax credit availed of or passed on, under Section 122(1A) of the CGST Act, 2017 and MGST Act, 2017.”

2. The facts in brief are required to be noted.

The petitioners are individuals and are the employees/officers of M/s. Shemaroo Entertainment Ltd. (for short ‘the company’) duly incorporated under the provisions of the Companies Act, 1956, having its principal place of business at Marol Naka, Andheri (East), Mumbai. The genesis of the dispute appears to be a search action, which was initiated on 5 September 2023 in terms of authorization issued under Section 67(2) of the Central Goods And Services Tax Act, 2017 (for short ‘CGST Act’) in res