The four employees had approached the high court, challenging notices issued to them by the Joint Director of GST Intelligence in September 2023. 

The notices called upon them to show cause as to why a penalty of ₹3,731 crore - equivalent to the tax allegedly evaded by Maersk - should not be imposed on them. 

The GST Intelligence notice also stated that the Denmark-based shipping company, which involves containerised transportation of goods through vessels across the globe, had wrongly utilised an Input Tax Credit (ITC) of ₹1,561 crore. 

Senior advocate Harish Salve argued on behalf of the employees, stating that they were merely given power of attorney to represent the foreign company before the tax authorities, as it had no establishment in India. He maintained that there was no question of any of them benefiting from the ITC, and therefore, the liability to pay the tax or penalty could not be imposed on them by invoking provisions of the CGST Act. 

Salve further pointed out that the employees were not the decision-making authority for Maersk, nor were they in charge of or responsible for the business. They merely represented the Denmark-based company before the GST Intelligence authorities, which had initiated a probe in July 2021 into the alleged wrongful availing of the tax credit by Maersk, to provide information sought by the GST authorities from time to time. 

The GST department, on the other hand, claimed that the employees had a responsibility for Maersk’s business in India and, therefore, could not disown their involvement, alleging that they had connived with the company in evading tax liability. The department submitted that the notice was merely a show cause notice and should be allowed to be adjudicated and taken to its logical end, with the employees being able to raise all available legal and factual objections before the adjudicating authority. 

The division bench of Justice GS Kulkarni and Justice Firdosh Pooniwalla accepted the contention advanced on behalf of Maersk’s employees, holding that the penal provision contained in the GST Act would apply only to ‘a taxable person’ availing benefit transactions covered under the section. 

The bench held that an employee of a group company of Maersk cannot fall within the purview of the penal provision, as he or she cannot be a ‘taxable’ or a ‘registered person’ within the meaning and purview of the CGST Act and retain such benefits. 

“Thus, the designated officer invoking said provision against the petitioner(s) is an act wholly without jurisdiction, so as to issue the show cause notice,” said the bench while striking down the show cause notice. “A provision which ex-facie is inapplicable to the petitioner(s), an individual, has been invoked and applied in issuing the impugned show cause notice.”