The Supreme Court has upheld the order passed by the Bombay High Court, reaffirming the quashing of the personal penalty imposed on authorized signatories under GST law.
The bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed that the respondent were merely an employee of the Company and he could not have been fastened with the liability of Rs.3731 Crore.
The issue in this case revolved around a show cause notice issued to respondent, Shantanu Sanjay Hundekari, designated as a Senior Tax Operations Manager cum Authorized Person of Maersk, a prominent multinational corporation. The notice alleged that Hundekari, along with other employees, aided and abetted Maersk in committing various offenses under the CGST Act, resulting in substantial tax evasion. The notice demanded a penalty equivalent to the tax evaded by Maersk, amounting to an astronomical sum of Rs. 37,31,00,38,326.
Hundekari challenged the validity of the show cause notice on the grounds of jurisdictional overreach and misapplication of relevant provisions. The High Court meticulously analyzed the provisions of sections 122(1-A) and 137 of the CGST Act to ascertain their applicability to an individual employee such as Hundekari.
The bombay high court has held that it is clear from the relevant contents of the show cause notice that the basic jurisdictional requirements/ingredients, are nor attracted for issuance of the show cause notice under Section 74 of the COST Act so as to inter alia invoke Section 122(1-A) and Section 137 against the petitioner.
The Bombay High Court noted that it is ill-conceivable to read and recognize into the provisions of Section 122 and Section 137, of the CGST Act any principle of vicarious liability being attracted. There could be none. Thus, Respondent no. 3 clearly lacks jurisdiction to adjudicate the show cause notice in its applicability to the petitioner. Thus qua the petitioner, the show cause notice is rendered bad and illegal, deserving it to be quashed and set aside.
The High Court stated that it is highly unconscionable and disproportionate for the concerned officer of the Revenue to demand from the petitioner an amount of Rs.3731 crores, which in fact is clearly alleged to be the liability of Maersk, as the contents of the show cause notice itself would demonstrate. The petitioner would not be incorrect in contending that the purpose of issuing the show cause notice to the petitioner who is merely an employee, was designed to threaten and pressurize the petitioner.
The department challenged the order of the Bombay High Court before the Supreme Court.
The Apex court dismissed the special leave petition filed by the department.
Case Details
Case Title: Union Of India & Ors. Versus Shantanu Sanjay Hundekari
Case No.: SPECIAL LEAVE PETITION (CIVIL) Diary No.55427/2024
Date: 24-01-2025
Counsel For Petitioner: Mr. N.Venkataraman, A.S.G., Mr. Gurmeet Singh Makker, AOR, Mr. V C Bharathi, Adv., Mr. Prasanjeet Mahapatra, Adv., Ms. Megha Karnwal, Adv., Mr. Udai Khanna, Adv., Mr. Shantnu Sharma, Adv.
Counsel For Respondent: Anuradha Dutt, Adv.
