SC: Company Employees Not Liable for GST Penalty Under CGST Act Sections 122(1-A) and 137

The Apex Court of India ruled that the employees of Maersk Line India cannot be held liable for Goods and Services Tax (GST) penalties under Section 122(1-A) and Section 137 of the Central Goods and Services Tax Act, 2017 (CGST Act).

The Apex Court of India furnished a decision in a Special Leave Petition furnished via the Union of India against Shantanu Sanjay Hundekari, Senior Tax Operations Manager and Authorized Signatory of Danish-origin global shipping goliath, Maersk.

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A petition was filed by the Revenue (the tax authorities) because they were unhappy with a previous ruling made by the Bombay High Court. This ruling dismissed a notice that was sent to the employees of Maersk Line India. The notice involved a demand for ₹3,731 Crore, claiming that the employees had assisted the company in avoiding tax payments and that they had benefited from this situation.

It was marked by the Bombay High Court Bench of Justice Firdosh P. Pooniwalla and Justice G.S. Kulkarni that the penal provisions Section 137 of the CGST Act may not be attributed to Shantanu Sanjay Hundekari as it is related to the obligation of Maersk- the present special leave petition has been instituted impugning the order of High Court.

It shows that it is not good to read the provisions of sections 122 and 137 of the CGST Act to describe the norms of vicarious liability against an Employee of the arraigned company, the Bench proceeded to set aside the impugned Show Cause Notice (SCN) considering it to be bad and illegal.

Citing that it is unconscionable and disproportionate for the Revenue to ask for an amount of ₹3,731 Crore from an employee against the liability of Maersk.

For the Union of India N.Venkataraman, A.S.G., Gurmeet Singh Makker, AOR, V C Bharathi, Prasanjeet Mahapatra, Megha Karnwal, Udai Khanna, Shantnu Sharma appeared and the Revenue, Advocates Anuradha Dutt, Tushar Jarwal, Rahul Sateeja, Vikrant A Maheshwari, Raghav Dutt and B. Vijayalakshmi Menon, AOR appeared for the Respondents in the case before the Supreme Court.

The Apex Court Bench, comprising Justice J.B. Pardiwala and Justice R. Mahadevan, after hearing the submissions, remarked that the major issue before the Bombay High Court concerned the interpretation of Section 122(1-A) and Section 137 of the GST Act, and observed no infirmity in the impugned order.

Confirming that Shantanu Sanjay Hundekari was the only employee of Maersk who could not be fastened with the obligation to file Rs 3,731 Crore, the special leave petitions have been dismissed by the Supreme Court while keeping open the particular question of law for the discussed legal provisions.