Bombay High Court Stays GST Penalty on Director Under Section 122(1A) of CGST Act

Background of the Dispute

The Bombay High Court, in Raviprasad Ganesh Zantye Vs Union of India and Ors. (Bombay High Court), examined a challenge to a penalty order issued under Section 122(1A) of the CGST Act, 2017.

The impugned order, dated 17 March 2026, was passed by Respondent No. 3 and fastened a penalty liability upon the writ petitioner, who was a director of a company. The core issue raised was whether Section 122(1A) could at all be invoked to impose penalty on an individual such as a present or former director, as distinct from a “taxable person” under the CGST framework.

The assessee (petitioner) argued that the penalty provision in Section 122(1A) is confined to a taxable person, and therefore a director, in his individual capacity, cannot be subjected to penalty under that clause.

In support of this legal position, reliance was placed on earlier judgments of the Bombay High Court in:

  • Shantanu Sanjay Hundekari vs. Union of India, 2024(3) TMI 1277
  • Amit Manilal Haria & Ors. vs. The Joint Commissioner, CGST & Central Excise & Ors., 2026(2) TMI 1409

Petitioner’s Case Before the Court

The petitioner challenged the order dated 17 March 2026 primarily on the following grounds:

  1. Inapplicability of Section 122(1A) to individuals
    The assessee contended that Section 122(1A) of the CGST Act, 2017 (the Act of 2017) is designed to apply to a taxable person and not to any and every individual.

    • It was emphasized that directors, whether current or former, are not automatically treated as “taxable persons” in their personal capacity merely because of their association with a registered entity.
    • Therefore, invoking Section 122(1A) against an individual director, as if he were the taxable person, was asserted to be legally unsustainable.

  2. Support from binding precedents
    The petitioner’s counsel, Adv. Bharat Raichandani a/w Adv. Mahesh Raichandani i/b UBR Legal, drew the Court’s attention to the earlier decisions of the Bombay High Court in:

    • Shantanu Sanjay Hundekari vs. Union of India, and
    • Amit Manilal Haria & Ors. vs. The Joint Commissioner, CGST & Central Excise & Ors.

    In those matters, the Court had considered the scope of Section 122(1A) and indicated that the provision targets taxable persons, not individual directors as such. The petitioner argued that, in light of these decisions, the legal position is now well settled, and the impugned penalty order runs contrary to this settled law.