The Gauhati High Court stayed GST penalty proceedings against an individual partner over alleged wrongful ITC claims of ₹16.21 crore by a partnership firm, raising important questions on partner liability under Section 122(1)(A) of the CGST Act.
Case Reference: Shri Shiv Kumar Mittal v. Union of India
Court: Gauhati High Court
Case No.: WP(C)/6027/2026
Date of Interim Order: 4 November 2026
Bench: Justice Soumitra Saikia
Introduction
The Gauhati High Court has granted interim protection to an individual partner of a partnership firm by staying further proceedings under Section 122(1)(A) of the Central Goods and Services Tax (CGST) Act, 2017, in connection with an alleged wrongful availment of Input Tax Credit (ITC) amounting to ₹16.21 crore.
The Court observed that initiating separate penalty proceedings against an individual partner may not be necessary when the GST Department has already initiated proceedings against the partnership firm for recovery of the disputed ITC arising out of the same alleged transactions.
The interim order highlights an important issue concerning the scope of individual liability of partners in GST proceedings.
Background and Facts of the Case
The petitioner, Shri Shiv Kumar Mittal, was an individual partner of GM Coke Industries, a partnership firm engaged in the manufacture of coke.
The GST Department alleged that the firm had wrongly availed ITC amounting to approximately ₹16.21 crore on the basis of invoices and corresponding e-way bills issued by 17 suppliers, without actual receipt of the underlying goods.
On the basis of these allegations, the Department initiated proceedings against the partnership firm by issuing a separate show cause notice seeking recovery of the allegedly irregularly availed ITC.
Subsequently, the Department initiated another proceeding against the petitioner individually by issuing a show cause notice dated 30 September 2026. The notice proposed imposition of a penalty under Section 122(1)(A) of the CGST Act on the ground that he was a partner of the firm allegedly involved in wrongful availment of ITC.
Aggrieved by the initiation of separate proceedings against him, the petitioner approached the Gauhati High Court.
Arguments Advanced by the Petitioner
Appearing for the petitioner, Senior Advocate Dr. Ashok Saraf contended that the disputed ITC had been availed by the partnership firm and not by the petitioner in his individual capacity.
It was argued that the Department had already initiated proceedings against GM Coke Industries for recovery of the disputed ITC. Therefore, initiating separate penalty proceedings against one of its partners for the same alleged wrongful availment was not justified.
The petitioner further relied upon the Supreme Court’s decision in Dhanasihgh Prabhu v. Chandrasekar & Ors., submitting that the liability of a partnership firm extends jointly and severally to its partners.
Observations of the High Court
Justice Soumitra Saikia, after examining the pleadings and submissions, made a prima facie observation that when proceedings had already been initiated against the partnership firm for recovery of the disputed ITC, separate proceedings against one of its partners for the same alleged wrongful benefit did not appear to be necessary.
The Court observed that:
Separate proceedings against one of the partners for benefits purportedly claimed wrongly by the partnership firm did not appear to be necessary.
The Court accordingly considered it appropriate to grant interim protection to the petitioner pending further examination of the matter.
Interim Order and Directions
The Gauhati High Court issued notice to the respondents, directing them to file their affidavits and complete their instructions within the prescribed period.
Importantly, the Court directed that:
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No further action shall be initiated by the GST authorities under the impugned show cause notice during the pendency of the interim protection.
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The respondents shall file their necessary affidavits.
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The matter shall be listed again on 9 December 2026.
It is important to note that this is an interim order and not a final adjudication on the legality of the proposed penalty or the alleged wrongful availment of ITC.
Legal Significance of the Decision
This interim order raises an important question concerning the liability of individual partners under GST law when the alleged wrongful availment of ITC is attributable to a partnership firm.
The decision is particularly relevant in cases where the Department initiates proceedings against a partnership firm for recovery of allegedly wrongful ITC and simultaneously proceeds against individual partners under Section 122(1)(A) merely on account of their status as partners.
However, the order should not be interpreted as laying down an absolute prohibition against imposing penalties on partners. The applicability of Section 122 would depend upon the specific allegations, statutory provisions and evidence concerning the role of the individual partner.
The decision nevertheless provides an important basis for challenging separate proceedings where the alleged contravention is essentially attributed to the partnership firm and no distinct basis for individual penal liability is demonstrated.
Conclusion
The Gauhati High Court’s interim intervention underscores the importance of examining the legal basis for initiating parallel proceedings against partnership firms and their individual partners under GST law.
For taxpayers and professionals dealing with GST investigations, the order highlights the need to distinguish between the liability of a partnership firm for alleged wrongful ITC availment and the independent liability of an individual partner.
The final determination in this case will be significant in understanding the scope of individual penalty proceedings under Section 122(1)(A) of the CGST Act.