Case Of: Senior Executives of Shemaroo Entertainment Ltd.
Issued By: Bombay High Court
Date: 26th Feb 2026
Personal GST Penalty on Executives Set Aside for Retrospective Overreach and Lack of Statutory Basis
The dispute arose from penalty proceedings initiated against the CEO, CFO and Joint Managing Director of Shemaroo Entertainment Ltd., where the Department sought to impose substantial personal penalties on the allegation that they were responsible for, and had benefited from, transactions leading to wrongful availment of ITC by the company since the inception of GST.
The case was significant because it attempted to fasten personal liability on senior management for corporate tax positions, relying on a provision that was introduced later in the GST regime but invoked for earlier periods as well. The officers approached the Bombay High Court challenging both the jurisdiction and the retrospective application of the penal action.
The petitioners argued that they were not acting as taxable persons in their individual capacity, nor had they derived any personal benefit from the alleged transactions. They further contended that a penal provision inserted subsequently could not be stretched backward to cover conduct from 2017 onwards.
The matter therefore raised an important question in GST enforcement — whether directors and key managerial personnel can be personally penalised for company-level disputes without clear statutory backing and without strict satisfaction of legal preconditions.
The High Court carefully examined the scheme of the penalty provisions and drew a clear distinction between liability of a registered taxable entity and the personal exposure of individuals. It observed that the law must be read strictly when penalties are involved, and liability cannot be inferred merely from designation or position held within a company.
On the issue of timing, the Court held that a penal provision cannot be applied retrospectively unless the statute expressly provides so. Since the provision relied upon came into force later, it could not be used to penalise conduct relating to earlier financial years.
The Court also noted the absence of concrete material to demonstrate that the executives had personally retained any benefit from the alleged transactions. In the absence of such foundational facts, initiation of penalty proceedings was held to be legally unsustainable.
The judgment ultimately quashed the penalty action, reinforcing that GST enforcement, particularly where personal liability is sought to be imposed, must operate within clear statutory limits and cannot proceed on expansive or retrospective interpretation.