GST Penalty on Partners Under Section 122(1A): Constitutional Dimensions Beyond Article 20(2)

Introduction: A Judgment That Opens a Larger Debate

The Gauhati High Court's ruling in Mayank Bansal Vs Union of India has brought renewed attention to one of the more nuanced intersections of GST law and constitutional protections. The Court affirmed that penal liability under Section 122(1A) of the Central Goods and Services Tax Act is not confined to the taxable person alone — it extends to individuals who stood to gain from the offending transaction or at whose direction such a transaction was executed.

While the decision rests primarily on statutory construction, it simultaneously opens a wider constitutional question that deserves careful examination: when both a partnership firm and its partners are penalised for the very same GST violation, does such a dual penalty structure violate foundational principles of fairness and proportionality — even if Article 20(2) of the Constitution does not directly apply?

This article analyses that question in depth, tracing the contours of constitutional jurisprudence, the civil versus criminal distinction in tax penalties, and the likely trajectory of future litigation around Section 122(1A).

Understanding Article 20(2): The Constitutional Text and Its Judicial Boundaries

Article 20(2) of the Constitution of India states:

"No person shall be prosecuted and punished for the same offence more than once."

At first reading, this provision appears broad enough to cover any situation involving repeated punishment for the same conduct. However, the Supreme Court of India has historically interpreted this protection within a carefully defined boundary.

The Foundational Precedent

In Maqbool Hussain v. State of Bombay, the Supreme Court laid down what remains the foundational framework for understanding Article 20(2). The Court held that the constitutional safeguard operates only where two cumulative conditions are satisfied:

  • There must have been a prosecution in the legal sense; and
  • There must have been a punishment handed down by a judicial or quasi-judicial tribunal.

Critically, the Court concluded that proceedings before customs authorities did not constitute a "prosecution" before a judicial tribunal. As a result, those proceedings fell outside the protective scope of Article 20(2) entirely.

Consistent Judicial Position on Departmental Proceedings

This interpretation has been consistently upheld in subsequent decisions. Indian courts have repeatedly affirmed that:

  • Departmental proceedings do not amount to prosecution;
  • Administrative adjudications by tax authorities are not equivalent to criminal proceedings;
  • Regulatory consequences imposed by statutory authorities remain outside the constitutional protection under Article 20(2).

The result is that the guarantee embodied in Article 20(2) operates principally in the domain of repeated criminal prosecutions — not in the realm of civil or regulatory action, regardless of how financially burdensome such action may be.

Tax Penalties Are Civil in Nature: Why This Matters

This distinction between criminal prosecution and civil adjudication is especially significant in the context of tax law.

The Civil Character of GST Penalties

Indian courts have, over decades, firmly established that tax penalties — including those imposed under GST — are:

  • Civil liabilities aimed at securing revenue compliance;
  • Coercive and remedial in character, not punitive in the criminal law sense;
  • Designed to deter non-compliance rather than to inflict punishment as understood in criminal jurisprudence.

This classification carries important consequences. Because tax penalty proceedings are adjudicatory and not prosecutorial in nature, a direct constitutional challenge to Section 122(1A) based on Article 20(2) would encounter serious structural obstacles. The very nature of GST penalty proceedings places them outside the realm that Article 20(2) was designed to govern.

The severity of a financial penalty does not, by itself, transform a civil proceeding into a criminal prosecution for constitutional purposes.