In a major relief to senior executives of Shemaroo Entertainment Ltd., the Bombay High Court on Wednesday set aside a ₹400-crore personal penalty imposed by GST authorities, ruling that employees who are not “taxable persons” cannot be held liable under Section 122(1A) of the Central Goods and Services Tax (CGST) Act.
A division bench of Justices G.S. Kulkarni and Aarti Sathe allowed petitions filed by Amit Manilal Haria (Chief Financial Officer), Hiren Uday Gada (Chief Executive Officer), and Atul Hirji Maru (Joint Managing Director). The court quashed the Order-in-Original dated February 1, 2025, insofar as it imposed personal liability on the three individuals.
The penalty had been levied by the Joint Commissioner, CGST and Central Excise, Mumbai East, who imposed ₹133.61 crore each on the executives for alleged wrongful availment and passing of input tax credit (ITC) amounting to about ₹133.60 crore between FY18 and FY22.
In its 26-page judgment authored by Justice Kulkarni, the bench clarified that Section 122(1A) applies only to a “taxable person” as defined under Section 2(107) of the CGST Act—that is, someone registered or liable to be registered under GST law. Employees acting in their official capacity for company transactions do not fall within that definition, the court held.
The judges observed that two conditions must be met to impose such a penalty: the individual must have retained the benefit of the transaction, and the transaction must have occurred at their instance. The court found no specific finding in the GST order establishing that the executives had personally retained any benefit.
The court also ruled that Section 122(1A), which came into force on January 1, 2021, cannot be applied retrospectively to transactions between July 2017 and December 2020, as doing so would violate Article 20(1) of the Constitution, which bars retrospective penal provisions.
The judgment relied on an earlier ruling in Shantanu Sanjay Hundekari vs. Union of India, which had been upheld by the Supreme Court.
The case originated from a CGST search in September 2023 over alleged fake invoicing. The executives were briefly arrested and later granted bail, while Shemaroo deposited ₹12 crore under protest.
While proceedings against the company will continue, the High Court granted complete relief to the executives from personal liability. Tax experts said the ruling reinforces that corporate tax disputes cannot be converted into personal penalty cases without clear statutory backing and proof of personal gain.
Bombay High Court Quashes ₹400-Crore Personal GST Penalty on Shemaroo Entertainment Ltd Executives
