In a notable ruling, the Supreme Court of India ruled that the employees of a Company may not be attributed liability for Goods and Services Tax ( GST ) Penalty under Section 122(1-A) and Section 137 of the Central Goods and Services Tax Act, 2017 (CGST Act).
The decision was given by the Supreme Court of India in a Special Leave Petition filed by the Union of India against Shantanu Sanjay Hundekari, Senior Tax Operations Manager and Authorized Signatory of Danish-origin global shipping goliath, Maersk.
The instant Petition was lodged by the Revenue being aggrieved by a preceding decision passed by the Bombay High Court quashing a Show-Cause Notice (SCN) issued to the employees of Maersk Line India raising a Demand of ₹3,731 Crore on the grounds that the employees had aided the logistics giant in evading tax liabilities and benefited from the same as well.
The Bombay High Court Bench of Justice Firdosh P. Pooniwalla and Justice G.S. Kulkarni had observed that penal provisions Section 137 of the CGST Act may not be attributed to Shantanu Sanjay Hundekari since the same pertained to Maersk’s liability – the present Special Leave Petition had been instituted impugning the High Court order.
Indicating that it is ill-conceivable to read into the provisions of Sections 122 and 137 of the CGST Act to ascribe principles of vicarious liability against an Employee of the arraigned company, the Bench proceeded to set aside the impugned SCN deeming it to be bad and illegal.
Remarking that it is highly unconscionable and disporportationate for the Revenue to demand an amount of ₹3,731 Crore from an employee against the liability of Maersk.
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While N.Venkataraman, A.S.G., Gurmeet Singh Makker, AOR, V C Bharathi, Prasanjeet Mahapatra, Megha Karnwal, Udai Khanna, Shantnu Sharma appeared for the Union of India 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 matter before the Supreme Court.
After hearing the submissions made, the Supreme Court Bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed that the key issue before the Bombay High Court was regarding the scope of interpretation of Section 122(1-A) and Section 137 of the GST Act and observed no infirmity with the impugned order.
Affirming that Shantanu Sanjay Hundekari was a mere employee of Maersk who cannot be fastened with the liability to pay off ₹3,731 Crore, the Apex Court dismissed the Special Leave Petitions while keeping open the specific question of law regarding the discussed statutory provisions.
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