Holding

The High Court held that the adjudicating authority’s findings were sufficient and the order imposing penalty under Sections 122(1A) and 122(3) stands, dismissing the writ petition.

Summary

The petitioners, partners of M/s. Maa Renuka Trading, were penalised under Sections 122(1A) and 122(3) of the Central Goods and Services Tax Act, 2017 for allegedly generating fake invoices, e‑way bills and routing funds through hawala to fraudulently claim input tax credit. They filed a writ petition under Article 226 seeking to quash the penalty order, alleging lack of a finding on liability, violation of natural justice and that partners cannot be separately penalised when the partnership itself was already penalised. The petitioners chose to invite an order on merits rather than pursue the statutory appeal under Section 107. The High Court examined the investigation records, statements of the petitioners, WhatsApp chats and forensic evidence, finding that the partners were complicit in the fraud. The Court held that the adjudicating authority’s findings were duly recorded, the order was reasoned and did not breach natural justice, and the petitioners had an alternative remedy of appeal. Consequently, the writ petition was dismissed.

Issues considered

The order imposing penalty under Sections 122(1A) and 122(3) of the CGST Act can be set aside for lack of findings or violation of natural justice.
Whether partners can be separately penalised when a penalty has already been imposed on the partnership firm.
Whether the existence of an alternative remedy under Section 107 of the CGST Act bars the writ petition.

Legislation cited

Central Goods and Services Tax Act, 2017s. 107, s. 122(1A), s. 122(3), s. 67(2), s. 70

Subjects

CGSTPenaltySection 122Natural JusticeWrit PetitionPartnershipFraudInput Tax CreditAppeal under Section 107

Judgment

C/SCA/7965/2026 ORDER DATED: 17/06/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 7965 of 2026
=============================================
MR MANOJ RAMKISHAN AGRAWAL & ANR.
Versus
UNION OF INDIA & ANR.
=============================================
Appearance:
MR HARJOTSINGH J KASSOWAL(11053) for the Petitioner(s) No. 1,2
MR CB GUPTA(1685) for the Respondent(s) No. 2
MR PRADIP D BHATE(1523) for the Respondent(s) No. 1,2
=============================================
CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

Date : 17/06/2026
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. On 12.06.2026, after the order was passed, the matter
was adjourned at the request of learned advocate
Mr.Harjotsingh J. Kassowal, appearing for the petitioners, to
enable him to obtain instructions as to whether the petitioners
intended to prefer an appeal under Section 107 of the Central
Goods and Services Tax Act, 2017 (for short, "the CGST Act,
2017"), or whether they wished to invite an order on merits.

2. Today also, learned advocate Mr. Harjotsingh J. Kassowal,
appearing for the petitioners, has submitted that the
petitioners wish to invite an order on merits and do not intend
to prefer an appeal before the Appellate Authority under
Section 107 of the CGST Act, 2017.

3. In the present petition, the petitioners have prayed for
quashing and setting aside the impugned Order-in-Original
dated 30.01.2026 passed by the respondent No.2, whereby

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penalty has been levied upon under Sections 122(1A) and
122(3) of the CGST Act, 2017.

4. Learned advocate Mr. Harjotsingh J. Kassowal, appearing
on behalf of the petitioners, has submitted that the present
petition is maintainable and deserves to be entertained on two
counts: (i) no finding has been recorded by the respondent
No.2 establishing the liability of the present petitioners under
Sections 122(1A) of the CGST Act, 2017 and (ii) the impugned
Order-in-Original dated 30.01.2026 has been passed in
violation of the principles of natural justice, without
considering the defence raised by the petitioners, particularly
in their reply dated 15.05.2025. It is thus submitted that the
impugned Order-in-Original deserves to be quashed and set
aside on the ground of violation of the principles of natural
justice. He has further submitted that the petitioners are
partners of the partnership firm and since a penalty has been
been imposed upon the partnership firm, the petitioners
cannot be made to penalty under the provisions of section
122(1A) of the CGST Act, 2017. It is submitted that no separate
penalty could have been imposed upon the petitioners. No
other submissions are advanced.

5. In support of his submissions, learned advocate
Mr.Kassowal placed reliance upon the judgment of the
Supreme Court in the case of M/s. Kranti Associates Pvt. Ltd.
and Anr. vs. Sh. Masood Ahmed Khan and Others, dated
08.09.2010, passed in Civil Appeal No.7472 of 2010 (arising
out of SLP (Civil) No. 20428 of 2007) and allied matters, as well
as the judgment of Bombay High Court in the case of Amit

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Manilal Haria and Ors. vs. Joint Commissioner, CGST and
Central Excise and Another, rendered in Writ Petition No.5001
of 2025 on 25.02.2026 questioning the retrospective effect of
applicability of Section 122(1A) of the CGST Act, 2017.

6. Opposing the present petition, learned Senior Standing
Counsel Mr.C.B. Gupta, appearing on behalf of the
respondents, has submitted that the present petition ought not
to be entertained, as the petitioners have an efficacious
alternative remedy of preferring an appeal under Section 107
of the CGST Act, 2017. He further submitted that the
respondent No.2 - the adjudicating authority, has extensively
considered all the relevant facts, including the defence put
forth by the present petitioners as well as the other noticees.
He has further submitted that the partnership firm and its
partners were involved in serious illegal activities, including
undertaking transactions through hawala, thereby evading tax
liability. He has submitted that a large-scale fraud was
unearthed during the investigation, which ultimately revealed
the complicity of the present petitioners along with the
partnership firm. It is further submitted that the partnership
firm and the present petitioners were involved in generating
bogus invoices and e-way bills, and that all such bogus
transactions were undertaken by the petitioners in their
capacity as partners of the partnership firm. He has further
submitted that, during the course of the investigation, the
petitioners had, in fact, admitted their involvement. It is thus
urged that, in view of the availability of the statutory
alternative remedy of appeal, the present writ petition may not
be entertained.

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7. In response to the judgments relied upon by learned
advocate Mr. Harjotsingh J. Kassowal, learned Senior Standing
Counsel Mr.C.B. Gupta has submitted that Section 122(1A) of
the CGST Act, 2017 was introduced with effect from
01.01.2021 and that the impugned Order-in-Original has been
passed by the adjudicating authority by invoking the said
provision against the petitioners. It is submitted that the
present writ petition does not warrant interference under
Article 226 of the Constitution of India.

8. We have heard the learned advocates for the respective
parties.

9. As already recorded in the preceding paragraphs and in
the order dated 12.06.2026, learned advocate Mr. Harjotsingh
J. Kassowal was called upon to state whether the petitioners
intended to avail the statutory remedy of appeal under Section
107 of the CGST Act, 2017 or whether they wished to invite an
order on merits. Since learned advocate Mr.Kassowal, on
instructions, opted to invite an order on merits, we are left with
no option but to adjudicate the present writ petition on its facts
and merits.

10. The petitioner No.1 and the petitioner No. 2 are partners
of M/s. Maa Renuka Trading Company. Along with the
partnership firm, the present petitioners and the other noticees
were subjected to investigation by the respondent-Department
in relation to the generation of fake invoices and e-way bills
without any actual supply of goods for F.Y.2020-21 and 2021-
22. A total of 23 persons/firms, including the partnership firm
and its partners, were issued notices. Acting upon specific

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intelligence, the respondent-Department carried out search
proceedings under Section 67(2) of the CGST Act, 2017 at the
registered place of business. During the course of the
investigation, statements of various persons, including the
present petitioners and Shri Ankur Kanda (broker), were
recorded. Necessary panchnamas were drawn at the spot, and
summons were also issued to the present petitioners as well as
the partnership firm.

11. The statement of Shri Krishna Goyal, Accounts Assistant
of M/s.Maa Renuka Trading, Indore, was recorded on
22.11.2021. Pursuant to the summons issued to the
petitioners, the statement of petitioner No.2 - Shri Yash Goyal,
was recorded on 25.11.2021. During his examination,
petitioner No. 2 was confronted with various vehicle
registration numbers and the corresponding e-way bills. He
admitted that the e-way bill generated for the movement of
goods from M/s. Retail Mart Enterprise, Delhi, to M/s.Diksha
Enterprise, Delhi, was incorrect, as the vehicle concerned could
not have covered such a long distance within the time
reflected therein. Similar questions were put to him with
regard to other vehicles, including vehicle No. GJ-06-AX-8617,
which was shown to have been used by three different firms
for transportation of goods. In respect of those transactions
also, petitioner No.2 made similar admissions and
acknowledged that the e-way bills had not been correctly
generated. He further admitted that M/s. Maa Renuka Trading,
Indore, and Shree Sanwariya Trading Company, Vadodara,
were receiving invoices of various firms registered in Delhi
through Shri Ankur Kanda. According to his statement, those

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Delhi-based firms had not made any genuine purchases of
bitumen and were merely engaged in paper transactions with
the object of passing on Input Tax Credit (ITC).

12. The petitioners were also confronted with the material
collected during the forensic examination of the mobile phones
belonging to petitioner No.1 - Shri Manoj Agrawal, in respect of
which a panchnama had also been drawn. Petitioner No.1,
upon being confronted with the statement of Shri Ankur Kanda
(broker), admitted that Shri Ankur Kanda used to send invoices
relating to the goods, allegedly purchased by them, whereupon
they would transfer the amounts into the bank accounts of
such parties as instructed by Shri Ankur Kanda. He further
admitted that Shri Ankur Kanda would thereafter return the
money to them in cash through angadia after deducting his
commission.

13. The adjudicating authority in paragraph No.7.5 of the
order has discussed thus : -

“7.5 Partners of M/s Maa Renuka Trading, Indore by operating and
managing M/s Sanwariya Trading, Vadodara for wrongly and
fraudulently availing and utilizing input tax credit have rendered
themselves liable for penalty under Section 122(1A) & Section
122(3) of CGST Act' 2017”

14. Thus, the adjudicating authority has analyzed the
complicity of the present petitioners, who are the partners of
M/s Maa Renuka Trading, Indore and operating and managing
M/s.Sanwariya Tranding, Vadodara for wrongly and
fraudulently availing and utilizing ITC, and thus rendering
themselves liable for penalty under Section 122(1A) and
Section 122(3) of the CGST Act, 2017.

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15. The adjudicating authority has further examined the
WhatsApp chats exchanged between petitioner No.1 - Shri
Manoj Agrawal and Shri Ankur Kanda. A categorical finding has
been recorded that on 13.03.2022, Shri Ankur Kanda
instructed Shri Manoj Agrawal (petitioner No.1) to deposit a
sum of Rs.25 lakhs into the bank accounts of two firms, i.e.
Rs.15 lakhs in the account of M/s. Bholenath and Rs.10 lakhs in
the account of M/s. Shri Shyam. It has further been recorded
that Shri Ankur Kanda subsequently returned a sum of Rs.23
lakhs in cash to Shri Manoj Agrawal after deducting his
commission.

16. Upon consideration of the aforesaid material, the
adjudicating authority, while dealing with noticee No.22
(petitioner No.1) and noticee No.21 (petitioner No. 2), has, in
paragraph No.13.4.6 of the impugned order, categorically
recorded that the investigation established that the affairs of
M/s.Maa Renuka Trading were conducted with the full
knowledge and consent of both its partners. The adjudicating
authority has further recorded that petitioner No.1 - Shri Manoj
Agrawal, has specifically admitted that all activities relating to
the Vadodara firm were carried out with the knowledge and
consent of petitioner No.2 - Shri Yash Goyal. Thus, the
adjudicating authority has recorded a categorical finding
establishing the complicity of the present petitioners, who are
the partners of M/s. Maa Renuka Trading.

17. The findings recorded by the adjudicating authority with
regard to the alleged fraud also delineate the entire modus
operandi adopted by the petitioners i.e. the creation of

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multiple fictitious suppliers, routing of invoices through a
broker, circular movement of funds through hawala channels,
generation of fake e-way bills, and continued availment of ITC
despite knowledge of the cancellation of the registrations of
the supplier firms, all with the object of availing ITC without
actual payment of tax. In paragraph No.13.8.1.3, the
adjudicating authority has recorded findings regarding the
prior knowledge and habitual conduct of petitioner No.1 - Shri
Manoj Agrawal. Similarly in paragraph No.13.8.2, the
adjudicating authority has discussed the evidence establishing
the knowledge and consent of petitioner No.2 - Shri Yash
Goyal.

18. In paragraph No.13.9.3, the adjudicating authority has
also examined the routing of funds through hawala
transactions. It has been recorded that petitioner No.1 - Shri
Manoj Agrawal, in his statement recorded under Section 70 of
the CGST Act, 2017, unequivocally admitted his active role in
coordinating the transactions with Shri Ankur Kanda. He
admitted that he used to send images of currency notes to Shri
Ankur Kanda as coded signals for routing cash through hawala
channels and that he also shared specific hawala details
relating to Indore and Mumbai to facilitate such transfers.

19. After recording the aforesaid findings and appreciating
the evidence on record, the adjudicating authority imposed
penalties upon the petitioners under the provision of Section
122 of the CGST Act, 2017.

20. At this stage, it would be apposite to refer to Section
122(1A) of the CGST Act, 2017, which reads as under:

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“Section 122(1A) - Any person who retains the benefit of a
transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-
section (1) and at whose instance such transaction is conducted,
shall be liable to a penalty of an amount equivalent to the tax evaded
or input tax credit availed of or passed on.
[(1B) [Any electronic commerce operator, who is liable to collect tax
at source under section 52,]—
(i) allows a supply of goods or services or both through it by an
unregistered person other than a person exempted from registration
by a notification issued under this Act to make such supply;
(ii) allows an inter-State supply of goods or services or both through
it by a person who is not eligible to make such inter-State supply; or
(iii) fails to furnish the correct details in the statement to be
furnished under sub-section (4) of section 52 of any outward supply
of goods effected through it by a person exempted from obtaining
registration under this Act, shall be liable to pay a penalty of ten
thousand rupees, or an amount equivalent to the amount of tax
involved had such supply been made by a registered person other
than a person paying tax under section 10, whichever is higher]”

21. A plain reading of Section 122(1A) of the CGST Act, 2017,
makes it evident that any person who retains the benefit of a
transaction covered under clauses (i), (ii), (vii) or (ix) of sub-
section (1), and at whose instance such transaction is
conducted, is liable to a penalty equivalent to the tax evaded
or the ITC availed of or passed on.

22. Thus, the findings recorded by the adjudicating authority
unequivocally establish the complicity of the present
petitioners in the generation of fake invoices and e-way bills
without any actual supply of goods, as well as their
involvement in hawala transactions. The impugned Order-in-
Original contains detailed findings based on the material
collected during the course of the investigation, including the
statements of the petitioners themselves, documentary
evidence and electronic records. We are, therefore, not

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inclined to interfere with the impugned Order-in-Original
merely on the grounds canvassed before us.

23. The judgement of the Apex Court in the case of M/s.
Kranti Associates Pvt. Ltd. (supra) will not even remotely
apply to the present case, as it deals with the passing of a
reasoned order by a quasi-judicial authority. We also do not
find that the impugned order is in any sense an unreasoned
order, additionally we also do find any violation of the
principles of natural justice warranting interference in exercise
of our writ jurisdiction under Article 226 of the Constitution of
India. The the petitioners have an efficacious statutory remedy
of appeal under Section 107 of the CGST Act, 2017, and all
factual findings including the applicability of the provisions of
Section 122(1A) of the CGST Act, 2017 retrospectively could
have been examined by the appellate authority, more
particularly in wake of the fact that there appears to be
widespread network involving numerous transactions by
various entities of defrauding the revenue, which was not the
case before Bombay High Court as reflected in the decision in
the case of Amit Manilal Haria (supra). However, since the
petitioners have insisted for reasoned order, we are
constrained to pass one.

24. Accordingly, the writ petition is rejected. Rule is
discharged. There shall be no order as to costs.
Sd/-
(A. S. SUPEHIA, J)

Sd/-
(VAIBHAVI D. NANAVATI,J)
MAHESH/03

Original copy of this order has been signed by the Hon'ble Judges.
Digitally signed by: MAHESH OMPRAKASH BHATI(HC01086), PRIVATE SECRETARY, at High Court of Gujarat on 19/06/2026 11:45:39

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