Is an employee of a company liable for forking the penalties concerned with the tax demands raised on the company by revenue authorities? Goods and Services Tax (GST) enforcement officials acknowledged the same at the time they punched a demand last September for a ₹3,731 crore penalty on a taxation manager and other employees of global logistics major Maersk for alleged tax evasion of the same amount by the company.
In between the GST disputes, a judgment that can draw down the relief to the other employees at firms, the Bombay High Court knocked down the demand and show cause notices issued via the Directorate General of Goods and Service Tax Intelligence in the case, terming them poor and unlawful.
A division bench of Justice GS Kulkarni and Justice Firdosh P Pooniwalla by citing the same as “highly unconscionable and disproportionate” for revenue officers to hold employees responsible for obligations of the company, ruled that the same shall not be wrong to contend that the objective to issue the SCN before the applicant who is just an employee was made to threaten and pressurize them.
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GST officials had alleged that Maersk wrongly used a sum of ₹1561 crore as GST Input Tax Credit, and those credits were wrongfully distributed. Maersk is a foreign company that does not have any employee or fixed establishment in India, just to represent and act on its behalf before the Indian tax authorities, the firm had given a power of attorney to certain employees of its steamer agent in India, incorporated as Maersk Line India Pvt. Ltd.
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“This ruling is significant for employees of large-sized businesses, where potentially interpretative GST positions are adopted by employees without any malafide intention. Such imposition of substantial penalties in recent investigations had caused lot of unrest amongst such employees,” a tax expert stated.
| Case Title | Shantanu Sanjay Hundekari Vs. Union of India |
| Case Number: | WRIT PETITION (L) NO. 30198 OF 2023 |
| Date | 28.03.2024 |
| Counsel For Appellant | Mr. Harish Salve, Ms. Anuradha Dutt, Ms. Fereshte Setha, Mr. Tushar Jarwal, Mr. Pranav Bansal, Mr. Rahul S., Mr. Mohit Tiwari, Ms. Mrunal P., Mr. Ameya Pant, Mr. Abhishek Tilak, Ms. Snigdha Mishra, Mr. Ashish Mishra |
| Counsel For Respondent | Mr. M.P. Sharma, Ms. Mamta Omle, Mr. Vishal Thadani |
| Bombay High Court | Read Order |
