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Parag Garg vs. Additional Commissioner and Anr. and connected matters

Writ Petition (Civil) · 2026:DHC:8390-DBDecided 29 Sept 2026New Delhi Bench
W.P.(C) 53/2026, W.P.(C) 1964/2026, W.P.(C) 5193/2025, W.P.(C) 5643/2025, W.P.(C) 5795/2025, W.P.(C) 6062/2025, W.P.(C) 6862/2025, W.P.(C) 6913/2025, W.P.(C) 9864/2025, W.P.(C) 13363/2025, W.P.(C) 13883/2026, W.P.(C) 14149/2025, W.P.(C) 14747/2025, W.P.(C) 14748/2025, W.P.(C) 14757/2025, W.P.(C) 14794/2025, W.P.(C) 16623/2024, W.P.(C) 16685/2024, W.P.(C) 16821/2025CNR: DLHC011079542025
Justice Anil Kshetarpal · Justice Bharat Parashar

Background

This petition was one of a large batch of writ petitions filed by individuals (mostly former company directors or persons otherwise linked to companies) who had been personally penalised under Section 122(1A) of the CGST Act for allegedly benefiting from fraudulent GST invoicing or wrongful claiming of Input Tax Credit (ITC) by their companies. All petitioners argued that (a) the law does not let a mere non-taxable individual be penalised this way, and (b) the penalty provision, introduced only from 1 January 2021, was being wrongly applied to transactions that happened earlier.

Decision Breakdown

The Court answered two common legal questions that governed the whole batch. First, it held that "any person" in Section 122(1A) is not limited to GST-registered ("taxable") persons: it extends to anyone, registered or not, who personally retained the benefit of the fraudulent transaction and at whose instance it was carried out, since restricting it to the company itself would let the real masterminds escape. Second, it held that Section 122(1A) applies only prospectively: it can only be used to penalise transactions or acts that actually took place on or after 1 January 2021, regardless of when the show-cause notice was later issued, because applying it earlier would violate the constitutional bar on retrospective criminal-type penalties (Article 20(1)). The Court did not decide whether any individual petitioner factually qualifies for the penalty: that fact-finding was left to the GST appellate authority.

Lesson Learnt

A penalty provision that came into force on a specific date cannot be used to punish conduct from before that date just because the tax department's notice was issued later, and "any person" language in a penal tax provision can reach individuals beyond the registered company itself if they personally profited from and directed the fraud.

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