Safiya Malik

The High Court of Punjab and Haryana Division Bench of Justice Lisa Gill and Justice Sudeepthi Sharma dismissed a petition challenging a GST recovery proceeding initiated against a former partner of a firm. The court upheld the validity of the proceedings initiated under the Punjab Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017. The Bench concluded that the liability of a retiring partner under Section 90 of the CGST Act continues until the date on which the Commissioner receives written intimation of retirement. Accordingly, the court declined to interfere and directed the petitioner to avail the remedies available under the statute.

The petition concerned the summoning order dated 20.02.2025 issued by the Excise and Taxation Officer-cum-Assistant Collector 2nd Grade, Ward No. 4, Dhuri. The petitioner, a former partner of the firm M/s Foreigners Auto Zone, sought to set aside the order demanding a deposit of Rs. 37,84,228/- and to restrain the respondents from attaching his property.

Also Read: Supreme Court Upholds Arbitral Award in Highway Dispute | Says ‘Work Contract’ Claims Against MP Govt Bodies Must Be Referred to MP Arbitration Tribunal Under Statutory Mandate

The petitioner stated that he and other partners had entered into a partnership and that his land, along with another partner Gurvinder Singh, was rented to the firm under an agreement dated 16.02.2017. The composition of the firm changed over time, with partners retiring and new partners being inducted.

The writ petition detailed the following partnership transitions:

1. Deepak Nagpal: Incoming 23.05.2016, Outgoing 25.01.2017, Retired
2. Gurvinder Singh: Incoming 23.05.2016, Outgoing 16.01.2019, Retired
3. Puneet Singla: Incoming 23.05.2016, Outgoing 25.02.2019, Retired
4. Harvinder Singh (Petitioner): Incoming 23.05.2016, Outgoing 20.04.2021, Retired
5. Raswinder Singh: Incoming 25.02.2019, Existing Partner
6. Deepak Kumar: Incoming 20.04.2021, Existing Partner

An order dated 06.05.2024 (DRC-07) assessed liability against the firm for the year 2023-24 under Section 73 of the PGST Act and the CGST Act. The liability of Rs. 37,84,228/- was due to discrepancies in the payment of GST. Subsequently, a notice dated 20.02.2025 was issued to the petitioner and Raswinder Singh.

The petitioner submitted that he retired on 20.04.2021 and discovered the property attachment on accessing land revenue records on 28.02.2025. He claimed that the firm had failed to notify authorities of his retirement, a responsibility he argued fell solely on the existing partners. A representation was submitted to the State Tax Officer on 11.03.2025 requesting removal of the attachment.

The State, however, contended that under Section 90 of the CGST Act, unless intimation is submitted to the Commissioner within one month of retirement, the liability of the partner continues. The State also argued that the petition was not maintainable as the petitioner had an alternative statutory remedy under Section 107 of the PGST Act.

Scrutiny of the firm’s tax filings between 01.04.2022 to 30.04.2022 revealed that while the outward tax liability was declared to be Rs. 20,95,142/-, it remained unpaid. As a result, proceedings under Section 73 were initiated. Intimations and show-cause notices were served but not responded to, leading to the DRC-07 order dated 06.05.2024.

After the statutory period under Section 78 lapsed, recovery proceedings were initiated on 20.11.2024 under Section 79. On 22.11.2024, the Tehsildar was asked to provide details of the petitioner’s property, and red entry instructions were issued on 20.12.2024.

As per GST records, the petitioner remained an active partner. The last amendment in the firm’s registration was made on 05.02.2023, which did not reflect the petitioner’s retirement. The department argued that since no subsequent amendment had been submitted, the petitioner remained liable.

The petitioner’s brother and current partner, Raswinder Singh, submitted a communication dated 28.02.2025 to the State Tax Officer confirming the petitioner’s retirement and induction of Deepak Kumar. Supporting documents were enclosed, including notarized retirement and partnership deeds. Another letter on the same date requested updating the firm’s email ID.

The Bench recorded: "At the outset, it is to be noticed that it is the case of petitioner himself that although he retired from partnership Firm in question on 20.04.2021, no intimation in respect to the same was given to the competent authority."

"Argument raised on behalf of petitioner that it was not possible for him to have intimated the competent authority on his own and it was only for the Firm to have taken necessary steps, therefore, he cannot be fastened with any liability, is devoid of any merit, hence rejected."

The court referred to Section 90 of the CGST Act, 2017: "Where any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of the firm shall, jointly and severally, be liable for such payment."

"Provided that where any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said partner to the Commissioner by a notice in that behalf in writing and such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date."

"Provided further that if no such intimation is given within one month from the date of retirement, the liability of such partner under the first proviso shall continue until the date on which such intimation is received by the Commissioner."

The Bench observed: "There is nothing on record to indicate that petitioner at any point of time had taken any steps to ensure intimation to authorities about his retirement from the Firm in question."

The court also stated: "It cannot be concluded that petitioner is not liable under the Act, especially in view of categoric provision of Section 90 of CGST Act, 2017."

Also Read: P&H High Court Grants Bail In ₹700 Crore GST Scam | Flags Abrupt Arrests Under CGST Act And Concerning Deviation From Procedure

On the timing of the communication from the petitioner’s brother, the Bench noted: "Learned counsel for petitioner was unable to point out as to why such course of action could not have been adopted earlier in April 2021 or within the month thereof when he allegedly retired from the Firm."

The High Court stated that no grounds had been presented which warranted interference under writ jurisdiction.

"Learned counsel for petitioner is unable to point out any ground whatsoever which calls for interference by this Court, at this stage."

Accordingly, the court issued the following direction: "Writ petition is, accordingly, dismissed with liberty to petitioner to avail remedy(ies) as may be available to him in accordance with law."

Advocates Representing the Parties:

For the Petitioner: Mr. Amit Gupta, Advocate

For the Respondents: Mr. Saurabh Kapoor, Additional Advocate General, Punjab

Case Title: Harvinder Singh vs State of Punjab and Others

Neutral Citation: 2025: PHHC:088498-DB

Case Number: CWP-9172-2025

Bench: Justice Lisa Gill, Justice Sudeepthi Sharma