The Punjab and Haryana High Court has held that Section 122(1A) of the Central Goods and Services Tax Act, 2017 operates prospectively, quashing a show cause notice and the consequential order insofar as they concerned the petitioner.
The Division Bench of Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor observed that the statute does not indicate that the provision has retrospective effect. The Court reiterated that a statutory provision remains prospective unless retrospective operation is established through an express provision or necessary implication.
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The petition raised a specific legal question: whether Section 122(1A) of the CGST Act could operate retrospectively.
The petitioner challenged a show cause notice dated March 27, 2024, and an order dated January 31, 2025. The controversy before the Court concerned the temporal applicability of the penalty provision.
Section 122(1A) imposes a penalty on a person who retains the benefit of certain transactions specified in Section 122(1), where those transactions are conducted at that person’s instance.
The provision refers to transactions covered by clauses (i), (ii), (vii) and (ix) of Section 122(1). It prescribes a penalty equivalent to the tax evaded or the input tax credit availed of or passed on.
The central issue in the petition was whether this liability could be applied retrospectively.
The High Court found no indication in the statutory provision that Parliament intended it to operate retrospectively.
Applying the settled principle governing the interpretation of statutes, the Bench explained that retrospective operation must follow either from specific statutory language or by necessary implication. In the absence of either, the provision would remain prospective.
On that basis, the Court held that Section 122(1A) could not be treated as having retrospective effect.
The Bench referred to two Division Bench decisions addressing the same issue.
The first was the Delhi High Court’s judgment in Parag Garg v. Commissioner, Adjudication, CGST Delhi West and Another.
The second was the Bombay High Court’s decision in Amit Manilal Haria and Others v. Joint Commissioner, CGST and Central Excise and Another.
After considering both judgments, the Punjab and Haryana High Court expressed complete agreement with the views taken by those Benches. It adopted the reasons recorded in those decisions and allowed the petition.
The Court quashed the show cause notice dated March 27, 2024, and the order dated January 31, 2025, insofar as they related to the petitioner.
The petitioner was represented by Advocate Deepak Gupta and the UOI was represented by Sr. Standing Counsel Sourabh Goel.
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