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Informist, Wednesday, Feb. 25, 2026

 

--HC rejects tax dept INR-1.3-bln penalty each on 3 former Shemaroo employees

 

NEW DELHI – The Bombay High Court Wednesday set aside the central goods and services tax department's INR-1.33-billion penalty each on Shemaroo Entertainment Ltd.'s former joint managing director Atul Hirji Mara, former chief executive officer Hiren Gada and former chief financial officer Amit Haria. The high court said that it did not find any specific findings by the tax department that any benefit of the alleged fake input-tax credit availed by the company were retained by the former employees. 

 

The only conclusion, which can be arrived at, was that the show cause notices and the consequent penalty orders passed against the employees were illegal and being without jurisdiction, said the high court. "...we do not find, as to how the jurisdictional requirement of applicability of Section 122(1A)(of CGST Act, 2017) can at all be said to be present and applicable, in the designated officer passing the impugned order-in-original, against the petitioners," said the court.

 

Further, there could not have been any retrospective application of Section 122 (1A) of the CGST Act in issuing the show cause notice for the period from July 2017 to July 2023 and for such reason also, the penalty order for such period cannot be sustained, said the court. Section 122(1A) of the CGST Act, 2017, effective from Jan. 1, 2021, imposes a heavy penalty on any person, including company directors or third parties, who causes or retains the benefits of key GST fraud offenses, such as issuing fake invoices or using input tax credit without actual supply. Thus, a person cannot be penalised under the law which was not in force for the period in which such alleged acts are stated to have been committed, said the court. 

 

The case has its genesis from a search action initiated by the department in 2023 against four firms Uttam Movies, Mangal Entertainment, JDS Motion Pictures and JV Media Solutions. A statement of Jhaverchand Devraj Soni, the partner and authorised signatory of these firms, was also recorded. Based on the statement, the investigation was extended to Shemaroo Entertainment and its place was also searched.

 

In 2024, a show cause notice was issued to Shemaroo Entertainment on allegations of availing and passing on ineligible input tax credit of INR 702.50 million and INR 633.50 million, by fake invoices without actual supply. Similar notices were separately issued to the former employees proposing imposition of penalty of INR 1.33 billion each. These notices were confirmed by a penalty order passed in 2025.

 

Advocate Abhishek A. Rastogi, appearing for the former employees, said that the petitioners were employees who were not registered under the CGST Act in their individual capacity. As such, they are not "taxable persons" and personal liability under Section 122 (1A) was legally unsustainable, said Rastogi. The penalty order is disproportionate as it seeks recovery of a large amount of INR-4-billion amount, which by no rationale can be the subject matter of any legal recovery from the petitioners, said Rastogi.

 

On Wednesday, shares of Shemaroo Entertainment ended 6.4% higher at INR 103.48 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury 

 

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