Delhi High Court on Section 122(1A) CGST: Any Person, and Only From 01.01.2021

In Parag Garg Vs Commissioner, Adjudication, CGST Delhi West and Anr. (W.P.(C) 13883/2026, CM APPL. 64918/2026, decided on 29/09/2026), the Delhi High Court settled two questions about the personal penalty provision in Section 122(1A) of the Central Goods and Services Tax Act, 2017 (the Act of 2017). It held, first, that the words "any person" are not limited to a registered or registrable taxable person, and second, that the provision applies only to transactions or acts committed on or after 01.01.2021, whatever the date of the show cause notice (SCN). The decision rests partly on Article 20(1) of the Constitution.

Background

The batch of petitions challenged SCNs and Orders-in-Original (OIO) that imposed personal penalties under Section 122(1A). The lead cases were W.P.(C) 5193/2025, W.P.(C) 6862/2025 and W.P.(C) 6913/2025.

The petitions arose from a common SCN dated 27.07.2023. By a common OIO dated 22.01.2025 under Section 74, the Adjudicating Authority confirmed a demand against M/s Worlds Window Impex India Private Limited on the allegation that it engaged in circular trading and irregularly availed Input Tax Credit (ITC) of Rs. 24,99,88,069/- through invoices allegedly issued without actual supply of goods. Besides the demand and penalty on the company, the authority imposed separate personal penalties of Rs. 24,99,88,069/- each on the three petitioners under Section 122(1A), and Rs.25,000/- each under Section 125, on the ground that they had been directors of the company at different times.

Although an appeal under Section 107 was available, the Court chose to hear the petitions because they raised a substantial question of law.

Questions framed

  1. Can a penalty under Section 122(1A) be recovered from a person who is not a taxable person?
  2. Does the penalty apply prospectively, to acts committed after 01.01.2021, the date the provision came into force?

Submissions

The petitioners said that neither the SCN nor the OIO attributed any specific act or role to them. They stated that Mr. Madhav Agarwal and Mr. Abhimanyu Sharma were appointed directors only in August 2020, after the period of the alleged transactions, and that Mr. Anil Kumar Misra resigned on 07.08.2020. They described themselves as employee-directors who were neither promoters nor shareholders, with no finding that they benefited.