The Gauhati High Court on 4 November passed an interim order in a petition filed by an individual partner of GM Coke Industries, restraining GST authorities from taking further action under a show cause notice proposing penalty under Section 122(1)(A) of the Central Goods and Services Tax (CGST) Act, 2017.
Justice Soumitra Saikia observed that separate penalty proceedings against a partner for allegedly wrongful availment of Input Tax Credit (ITC) by a partnership firm may not be necessary when proceedings for recovery of the disputed ITC have already been initiated against the firm. The Bench held:
“...the proceedings initiated by the respondents against M/S GM Coke Industries which appears to be a partnership, further proceedings in respect of the one of the partners individually for the benefits purportedly wrongly claimed by the partnership firm towards ITC sought to be recovered and for which proceedings are sought to be initiated including imposition of penalty, separate proceedings against one of the partners for such benefits purportedly stated to be wrongly claimed by the partnership firm does not appear to have been necessary in the view of the Court.”
GM Coke Industries challenged a show cause notice dated 30 September 2026, which proposed to impose a penalty on him individually for allegedly wrongful availment of ITC by the partnership firm, engaged in the manufacture of coke.
The Department alleged that the firm had availed ITC of Rs. 16.21 crore on the basis of invoices and corresponding e-way bills issued by 17 suppliers without actually receiving the goods. It had already issued a separate show cause notice against the firm seeking recovery of the allegedly wrongful ITC.
Subsequently, it initiated separate proceedings against the petitioner, proposing a penalty under Section 122(1)(A) on the ground that he was a partner of the firm.
Appearing for the petitioner, Senior Advocate Dr. Ashok Saraf argued that the partnership firm, and not the petitioner in his individual capacity, had availed the disputed ITC. He contended that once the Department had initiated proceedings against the firm, it could not justify separate penalty proceedings against one of its partners for the same alleged act.
He also relied on the Supreme Court's judgment in Dhanasihgh Prabhu v. Chandrasekar & Ors., submitting that the liability of a partnership firm extends jointly and severally to its partners.
The Bench considered the submissions and the material placed on record before making its prima facie observation against separate proceedings.
It issued notice to the respondents, returnable in four weeks, and granted them time to obtain instructions and file their affidavits. It directed the authorities not to take any further action under the impugned show cause notice until the next date of hearing.
The matter is listed next on 9 December 2026.
For Petitioner: Senior Advocate Dr. Ashok Saraf, assisted by Advocates A. Kaushik, P.K. Bora, N.N. Dutta and P. Baruah
For Respondent: Senior Advocate S.C. Keyal for the DGGI