SC stays GST recovery | Sec. 122(1A) can’t apply retrospectively

Case Details:Mukesh Kumar Garg vs. Union of India - [2025] 177 taxmann.com 199 (SC) 

Judiciary and Counsel Details

• PANKAJ MITHAL and PRASANNA B. VARALE, JJ.
• J. Sai Deepak, Sr. Adv., Akhil Krishan Maggu, Lav Virmani, Vikas Sareen, Ayush Mittal, Mrs. Oshin Maggu, Aryan Gangpal, Dr. Amardeep Gaur, Advs. and Ms. V. Maheshwari, AOR for the Petitioner.

Fact of the Case

The petitioner filed a Special Leave Petition (SLP) against a High Court order dismissing a writ petition challenging the imposition of penalty for incorporation of fake firms and availing fake input tax credit (ITC) without actual supply of goods. The Department conducted a detailed investigation, issuing a show cause notice alleging the petitioner colluded with others to incorporate 28 firms and avail ITC fraudulently. The impugned order imposed penalty on the petitioner, who contended that he was not an authorized signatory or taxable person, and thus, penalty under Section 122(1) was not applicable, arguing that at most a penalty of Rs. 25,000 under Section 122(3) could be imposed. The High Court held that factual issues such as the petitioner’s role and penalty justification could not be adjudicated in writ jurisdiction and directed the petitioner to avail remedy under Section 107. The matter was accordingly placed before the Supreme Court.

SC Held

The Hon’ble Supreme Court held that, Section 122(1) of the CGST Act would not apply to the petitioner as a non-taxable person, and provisions of Section 122(1A) which came into force from 01-01-2021 could not be applied retrospectively for assessment years 2017 to 2020. The Court granted a stay on the recovery of the penalty amount subject to the petitioner depositing 25% of the demand before the GST department either through Electronic Ledger or Cash Ledger.

List Of Cases Reviewed

• Mukesh Kumar Garg v. Union of India [2025] 174 taxmann.com 638 (Delhi) (para 2) SLP Granted.