Facts of the Case:
In this case, the petitioners were partners of M/s Quantum Infratech, a partnership firm engaged in construction of residential projects. Following an investigation, the GST authorities issued a show cause notice dated 03.08.2024 under Sections 74, 122(1A), and 122(3)(a) of the CGST/Assam GST Acts alleging suppression of turnover, non-payment of GST on construction services supplied to landowners, liability under reverse charge on transfer of development rights, and wrongful availment of input tax credit during the period July 2017 to March 2023.
Specific allegations were made against the partners that they had collected undisclosed cash consideration from customers, failed to issue invoices, hindered investigation proceedings, retained benefits arising from the transactions, and were instrumental in conducting the impugned transactions.
The adjudicating authority passed an Order-in-Original dated 04.02.2025 imposing penalty under Section 122(1A) upon the partners equivalent to the tax evaded by the firm. The appellate authority upheld the order on 26.08.2025. Challenging these orders, the partners approached the High Court contending that Section 122(1A) could be invoked only against the taxable person (the partnership firm) and not against individual partners, and further that the provision could not be applied to transactions occurring prior to its introduction on 01.01.2021.
Issue:
Whether partners of a partnership firm can be subjected to penalty under Section 122(1A) of the CGST Act when the taxable person is the partnership firm itself, and whether Section 122(1A), inserted with effect from 01.01.2021, can be invoked in respect of transactions and violations relating to periods prior to its enactment.
Held That:
The Gauhati High Court upheld the validity of the penalty proceedings against the partners and rejected both jurisdictional challenges.
The Court held that Section 122(1A) deliberately employs the expression “any person” and is intended to cover individuals who retain the benefit of transactions falling under clauses (i), (ii), (vii), or (ix) of Section 122(1) and at whose instance such transactions are conducted. Distinguishing between the expressions “person,” “taxable person,” and “registered person” used throughout Section 122, the Court concluded that Section 122(1A) is not confined to the taxable person alone.
It observed that in cases involving companies, LLPs, firms, or other juristic entities, the offending transactions necessarily occur through natural persons who direct and benefit from such activities. Consequently, partners or other individuals responsible for orchestrating the contraventions can be independently penalised if the statutory conditions are satisfied.
The Court disagreed with the contrary view taken by the Bombay High Court in Amit Manilal Haria and Shantanu Sanjay Hundekari, and instead endorsed the reasoning adopted by the Delhi High Court in Gurudas Mallik Thakur, which recognised that Section 122(1A) was enacted to fasten liability on persons who retain the benefits of fraudulent transactions undertaken through taxable entities. Since the adjudicating authority had recorded findings that the petitioners retained the benefits of the transactions and that the transactions were conducted at their instance, the Court held that the partners prima facie fell within the scope of Section 122(1A).
On the second issue, the Court held that Section 122(1A) does not create any new offence or independent contravention but merely identifies an additional category of persons liable for penalty in relation to violations already covered by Section 122(1), which has existed since the inception of the GST regime. Therefore, invoking Section 122(1A) in proceedings involving transactions prior to 01.01.2021 does not amount to retrospective creation of a new offence or violation. The Court further observed that Article 20(1) of the Constitution, which prohibits retrospective penalisation for offences, was not attracted because Section 122 concerns civil penalties and not criminal offences. Consequently, the Court agreed with the Delhi High Court’s view that Section 122(1A) could be applied so long as the provision was in force on the date of issuance of the show cause notice.
While rejecting the jurisdictional challenges, the Court clarified that it was not adjudicating upon the correctness of the factual findings regarding whether the petitioners had actually retained the benefits of the transactions or whether the transactions were conducted at their instance. Those issues were left open for consideration by the GST Appellate Tribunal. Accordingly, the petitioners were granted liberty to file appeals before the Tribunal within thirty days, with continuation of interim protection against coercive recovery until the stay applications are considered.
Case name: Mayank Bansal (Partner – Quantum Infratech Assam), Nadar Hussain (Partner Quantum Infratech) Versus The Union Of India, State Of Assam, Deputy Director DGGI Guwahati Zonal Unit, Assistant Commissioner CGST And Central Excise Guwahati, Additional Commissioner (Appeals) CGST Central Excise And Customs Guwahati, Commissioner CGST Central Excise And Customs Guwahati. dated 08.06.2026
