Bombay HC Grants Interim Relief in ₹400 Cr GST Penalty Case Against Shemaroo Employees. In a significant development, the Bombay High Court has stayed a ₹400 crore personal GST penalty imposed on three executives of Shemaroo Entertainment Ltd. The Court granted interim protection, barring authorities from initiating any coercive steps pursuant to the penalty orders.
The petitioners have challenged the constitutional validity of Section 122(1A) of the CGST Act, 2017 — particularly its retrospective application. The case, which revolves around the alleged wrongful availment of ₹70 crore in input tax credit by Shemaroo, raises key questions on the scope of personal liability in corporate tax matters.
The Division Bench of Justice B P Colabawalla and Justice F P Pooniwalla directed that no direct or indirect action should be taken against the executives until further hearings, acknowledging that the issues raised required deeper judicial consideration.
Background of the Case and GST Penalty
Tax authorities had invoked the newly notified Section 122(1A) — effective from 1 January 2021 — to levy personal penalties on the employees, attributing company-level infractions to individual officers. The total penalty imposed: ₹400 crore.
Arguing on behalf of the petitioners, Abhishek A Rastogi, founder of Rastogi Chambers, contended that the retrospective application of this penal provision was unconstitutional and legally unsustainable. He further highlighted contradictions between dates cited in the show-cause notices and the final orders — raising concerns about procedural fairness.
Constitutional Concerns Raised With Respect to GST Penalty
Rastogi emphasised that no personal gains had been accrued by the employees from the transactions in question, thereby failing the legal threshold for invoking personal penalties. He argued the penalties were arbitrary, excessive, and contrary to the principles of natural justice and proportionality.
The petitioners invoked constitutional protections against arbitrary executive action and maintained that employees cannot be punished without clear evidence of personal misconduct or benefit.
Court’s Prima Facie Observations
Taking cognizance of the arguments, the Court ruled in favor of interim protection, recognizing that the matter involves critical legal and constitutional questions. The case has been scheduled for final hearing on 10 June 2025.
Industry Reaction
Legal and tax professionals have lauded the Court’s interim relief, calling it a milestone for corporate accountability under GST. The decision is seen as a response to an emerging trend of aggressive enforcement targeting individual officers rather than companies.
‘This ruling reinforces that penal statutes must operate prospectively and within the boundaries of constitutional safeguards,’ said a senior tax advisor.
Conclusion
The Shemaroo case has emerged as a potential landmark in India’s GST jurisprudence. With the Bombay High Court halting coercive measures against the company’s executives, the spotlight now shifts to the constitutionality of Section 122(1A) and its implications for personal liability in corporate tax cases. The final verdict could redefine how Indian tax authorities navigate enforcement actions against company personnel — emphasizing fairness, proportionality, and due process. For more GST related queries consult senior GST experts from Vakilsearch today.
