151.            163.

            ABC Ltd a service provider, has availed and utilized ITC without actual receipt of goods. A personal penalty of Rs.1,90,000 has been imposed on Mr. X, manager of ABC Ltd and Rs.72,000 on Ms.Y, an officer of ABC Ltd who were in-charge and were responsible to ABC Ltd for the conduct of its business at the time of such availment and utilization of ITC and had agreed for their involvement in the offence . Discuss whether such penalty can be imposed on X and Y under the CGST Act.

               Section 137(2) read with section 122(3) makes every person who is incharge of the company personally liable to a penalty upto 25,000 in case of certain specified contraventions committed by the company. Such penalties may be leviable if the director, manager, secretary or other officers of the company were incharge  and responsible to the company for conduct of business of the company at a time when any of the specified contraventions were committed provided the same was within the knowledge of such director, manager, secretary or other officer of the company.

The specified contraventions include availment and utilization of ITC without actual receipt of goods and services.

Though X and Y were incharge and responsible to ABC Ltd for the conduct of its business at the time of such irregular availment and utilization of ITC, personal penalty could be imposed on both of them only if they are knowingly concerned with such contraventions. Further if it is established that offence was committed without their knowledge or they had exercised all due diligence to prevent the commission of such offence then they shall not be liable to punishment.

in this example, excessive penalty has been imposed than the prescribed amount, hence, both the persons will have to file appeal for reduction of penalty imposed.