Delhi HC: Gurudas Mallik Thakur V Commissioner of CGST & Anr. : W.P.(C) 5083/2025
Background
The Petitions was filed challenging the Impugned order passed by the Commissioner of CGST. The Petitioners were the directors of the company engaged in business of manpower recruitment. An investigation was conducted against the company wherein it was alleged that CENVAT credit had been availed by the Petitioners which was inadmissible. The adjudicating authority vide passing the impugned order held that the demands were liable to be paid by the company as also its directors i.e. the Petitioners. Further, penalties were also imposed on the Petitioners. The Petitioners contended that they were not taxable persons under Section 122 and Section 122(1A) of the CGST Act and therefore, no liability can be fastened on the Petitioners.
Department Contention
The respondents submitted that the Petitioners are active directors in the company and place reliance on the decision of Bombay HC in Bharat Parihar v. State of Maharashtra & Connected Matters (2023 SCC Online BOM 1310) to argue that the language used in Section 122(1A) of the CGST Act is ‘any person’ which is also the language used in Section 83 of the CGST Act. The term ‘any person’ is used in contradictory distinction with ‘taxable person’ and in the said judgment of the Bombay High Court has clearly held that the phrase ‘any person’ would include a non-taxable person.
Decision of the Court
The Hon’ble Delhi High Court held that the matter requires closer scrutiny on facts by the Appellate Authority as to who was responsible for running the company and who was taking decisions including relating to generation of invoices, making payments, etc. Directors of a company and others who manage such companies owe a responsibility to ensure that companies do not engage in such fraudulent activity for availment of ITC without actual supply of goods, distribution of ITC to persons who have raised fake invoices and non-filing of GST returns. Such activities would have a greater financial impact on society in general and the economy in particular therefore Section 122 (1A) of the CGST Act has been enacted to also make such persons liable under these circumstances. The court relegated the petitioners at the stage of Appellate Authority for fact findings on the role of the directors.
Our View
This judgement ensures that directors, managers, or decision-makers in companies cannot escape liability. It highlights that every person involved in wrongful GST activities like fake invoicing or claiming ITC without actual supply will be held accountable. This is an important step to stop GST fraud and make sure those in charge follow the rules.
GST Law India is a blog on GST and allied commercial laws managed by members of the law firm ALA Legal.