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CA Final · Indirect Tax Laws · Liability to Pay in Certain Cases

Gupta HUF, a registered taxable person, partitioned its business property among members Dinesh, Eshwar and the group of Fatima and Gopal on 1 October. On 15 December, a penalty of ₹1,20,000 was imposed for a contravention in August. Which is correct under the CGST Act, 2017?

Each member or group of members, namely Dinesh, Eshwar and the group of Fatima and Gopal, is jointly and severally liable for the ₹1,20,000 penalty. The contravention occurred before partition, and liability extends to amounts determined after partition.

  1. AOnly the Karta at the time of the contravention is liable
  2. BDinesh, Eshwar and the group of Fatima and Gopal are each jointly and severally liable for the penaltyCorrect
  3. CEach member or group is liable only for one-third of the penalty, i.e. ₹40,000
  4. DNo liability, because the penalty was imposed after partition

Explanation

Section 93(2) makes each member or group of members jointly and severally liable for tax, interest or penalty due up to partition, whether determined before or after partition. The August contravention falls before partition. Option C wrongly makes the liability proportionate, and option D ignores 'determined after the partition'.

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