The Delhi High Court has ruled that GST penalties for fraudulent transactions may reach unregistered beneficiaries, but cannot be imposed for conduct predating 1 January 2021.
A division bench of Justices Anil Kshetrapal and Bharat Parashar held that “any person” in Section 122(1A) of the Central Goods and Services Tax Act is broader than a taxable person. It covers someone who retained the benefit of specified transactions and at whose instance they were conducted, whether or not that person was registered or required to register.
The court said the provision was designed to reach those controlling sham entities or fake-invoice arrangements, rather than stopping at the registered vehicle used for the transactions.
However, the monetary sanction is penal in consequence and therefore operates prospectively. Its application turns on the date of the underlying act, not the later show-cause notice. Only conduct on or after 1 January 2021 can attract the provision.
The petitioners may appeal within four weeks, without limitation objections, for case-specific findings.