GST – Sections 74, 122(1A) and 137 of CGST 2017 – Notices to the employees of Agent /group company of foreign Shipping Company and demand of Rs.3731 crores with penalty since the employer wrongly availed ITC amount.

The petitioners in all the writ petitions are employees of a Shipping Company.  Alongwith others, they are served with show cause notice dated 19.9.2023 under Section 74 of the CGST Act, 2017, for Rs.3731,00,38,326/- towards penalty demanded from them for the tax amount defaulted by the employer.

The petitioner in W.P.No.30198 of 2023 is an employee as Taxation Manager of M/s. Maersk Line India Pvt Ltd from 12.12.2013.  By the Agency Agreement dated 1.8.2011, the  MLIPL was appointed as Steamer agent of  Maersk A/S incorporated under the laws of Denmark and engaged in the shipping business across the globe.

The petitioner in his capacity as Taxation Manager has rendered assistance to Maersk for compliance of taxation laws including GST.   He holds power of Attorney to represent Maersk before tax authorities.

It is said that input tax credit for Rs.1561/ crores pertaining to port handling, terminal handling and transportation services was wrongly utilized by Maersk.  However, according to the petitioner, he did not personally avail the benefit.

Section 122(1A) of CGST Act is applicable if it is shown that primary benefit of ITC was availed by the petitioner.  Similarly, SEction 137(1) or (2) had no application since the petitioner was neither in charge nor responsible to Maersk for its business.   The petitioner is not a taxable person under Section 2(107) who could be a person registered or liable to be registered under Section 22 or Section 24 of the Act.  Even otherwise, it is ill-conceivable to read and recognise into the provisions of Sections 12 and 137 of CGST Act, any principle of vicarious liability being attracted.   There could be none.   The Revenue clearly lacks jurisdiction to adjudicate the show cause notice in its applicability to the petitioner.   The petitioner would not be incorrect in contending that the purpose of notice to the petitioner being  a mere employee was designed to threaten and pressurize the petitioner.

Judgment dated 28.3.2024 in W.P.(L) No.30198 of 2023 of Shantanu Sanjay Hundekari Vs. Union of India and others  a/w connected writ petitions.