Case Law

Partners Personally Penalised for Fake-ITC Fraud Under Section 122(1A) CGST Act — Gujarat HC

Published 19 Aug 2026· Updated 25 Aug 2026· 5 min read

Executive Summary

The Gujarat High Court, in Manoj Ramkishan Agrawal & Anr. v. Union of India & Anr., has upheld personal penalty orders issued to two partners of a partnership firm under Sections 122(1A) and 122(3) of the CGST Act, after a GST department investigation — including forensic examination of the partners’ phones and WhatsApp chats — established that they personally coordinated a scheme of fake invoices, fake e-way bills, and hawala-routed cash payments to fraudulently avail Input Tax Credit. The firm itself had already been separately penalised for the same fraud. The Court rejected the partners’ writ challenge that a personal penalty could not additionally be imposed on them once the firm had been penalised.

Verification note: this account reflects Finoscape’s own internal research log (recorded this morning, 19 August 2026) and independent secondary corroboration located this session; the primary order text was not independently re-fetched this session due to a temporary tooling outage. The specific writ petition number, bench, and exact decision date are not stated because they were not independently confirmed this session — recommend confirming before this article is cited in any client-facing advice beyond the general legal principle below.

Background / Facts

Two partners of a partnership firm were personally issued penalty orders under Sections 122(1A) and 122(3) of the CGST Act following a GST department investigation. That investigation — including forensic examination of the partners’ phones and WhatsApp chats — established that the partners had personally coordinated a scheme involving fake invoices, fake e-way bills, and hawala-routed cash payments to fraudulently avail Input Tax Credit. The firm had already been separately penalised for the same fraud. The partners filed a writ petition arguing that (i) separate personal penalties could not be imposed on them once the firm had already been penalised for the same conduct, and (ii) the adjudicating order lacked specific findings against them individually.

The Court’s Reasoning

The Court held that Section 122(1A) of the CGST Act fastens liability on “any person” — not only the registered taxable person — who retains the benefit of specified fraudulent transactions and at whose instance such transactions are conducted, exposing that person to a penalty equal to the tax evaded or the ITC availed or passed on. This personal liability, the Court held, is independent of, and in addition to, any penalty separately imposed on the firm. Because the adjudicating authority had recorded detailed, evidence-backed findings establishing the partners’ individual complicity, the Court declined to interfere at the writ stage, relegating any remaining factual disputes to the statutory appeal route under Section 107 of the CGST Act.

Why It Matters

Section 122(1A) is frequently under-appreciated by practitioners as reaching only the registered entity — this ruling is a clear reminder that individuals who personally orchestrate a fraud scheme (directors, partners, or other “any person” within the provision’s scope) carry independent, additional personal exposure, on top of whatever penalty the firm itself faces. For firms handling GST fraud/investigation matters, this materially changes risk advice to individual partners/directors, not just the entity.

Key Takeaways

Section 122(1A) of the CGST Act applies to “any person” who retains the benefit of, or is instrumental in, specified fraudulent transactions — not only the registered taxable person.
Personal penalty on an individual under Section 122(1A)/122(3) is independent of and additional to any penalty imposed on the firm for the same fraud.
Evidence-backed individual findings (here, forensic phone/WhatsApp evidence) are what allowed the personal penalty to stand at the writ stage — a bare allegation without such findings would be a materially weaker basis for the department.
Writ courts will generally decline to reweigh detailed, evidence-backed adjudicating findings, directing the statutory appeal (Section 107) instead.
This is a fraud-and-forgery fact pattern (fake invoices, fake e-way bills, hawala payments) — the ruling should not be read as extending personal liability to ordinary, non-fraudulent partner conduct.

Practical Implications

Firms advising partners/directors of entities under GST fraud investigation should flag Section 122(1A)/122(3) personal exposure early and separately from the firm’s own defence — a partner’s personal liability turns on the department’s evidence of that individual’s own instrumentality or benefit, which is a distinct evidentiary question from the firm’s liability. Firms should also advise clients that once an adjudicating order records specific, evidence-backed individual findings, a writ challenge is unlikely to succeed on “no separate findings” grounds alone; the statutory appeal under Section 107 is the more realistic route to contest the factual findings themselves.

Action Checklist

In any GST fraud/investigation matter involving a firm, separately assess whether any partner/director faces independent personal exposure under Section 122(1A)/122(3).
Confirm whether the adjudicating order records specific, evidence-backed findings against the individual (not just the firm) before advising on writ prospects.
Where personal penalty is imposed on evidence-backed findings, advise pursuing the Section 107 statutory appeal on the facts rather than a writ petition on the “no separate liability” argument.
Treat forensic digital evidence (phone/WhatsApp records) as a material factor the department may rely on to establish individual instrumentality.

Relevant Sections / Rules / Case Citation

Section 122(1A), CGST Act, 2017 (personal penalty on “any person” who retains benefit of, or is instrumental in, specified fraudulent transactions)
Section 122(3), CGST Act, 2017 (general penalty provisions)
Section 107, CGST Act, 2017 (statutory appeal route)
Gujarat High Court: Manoj Ramkishan Agrawal & Anr. v. Union of India & Anr. — specific application number, bench, and decision date not independently confirmed this session; recommend confirming before further syndication.

FAQs

Q: Can a partner be personally penalised under GST law even after the firm has already been penalised for the same fraud?
A: Yes, per this ruling — Section 122(1A) imposes liability on “any person” who retains the benefit of, or is instrumental in, the fraudulent transaction, independent of and in addition to the firm’s own penalty.

Q: Does the department need specific findings against the individual, or is it enough that the firm was found liable?
A: Specific, evidence-backed findings against the individual are what allowed the personal penalty to survive a writ challenge here — a bare extension of the firm’s liability without individual findings would be a weaker basis.

Q: What kind of evidence supported the individual findings in this matter?
A: Forensic examination of the partners’ phones and WhatsApp chats, among other evidence, established their personal coordination of the fake-invoice/fake-e-way-bill/hawala scheme.

Internal Links

Act Explainer: Section 122(1A) CGST Act — Personal Liability of “Any Person” — /act-explainer-section-122-1a-cgst-personal-liability-any-person/ (Article 3, this cycle)
GST Litigation & Penalties hub — /category/gst-litigation/

Act Explainer: Section 122(1A) CGST Act — Personal Liability of “Any Person” (Article 3, this cycle)

Author & Disclaimer

Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational purposes and does not constitute legal or tax advice. The primary order was not independently re-verified this cycle due to a temporary research-tooling outage; readers relying on this analysis for a specific matter should independently confirm the citation before use.