Facts of the Case

M/S Raj And Company, through proprietor Mahesh Chandra Dubey, challenged an order dated 03.06.2024 imposing a penalty of Rs.50,000 under Section 125 of the GST Act, and the subsequent order dated 07.04.2025 dismissing the appeal as beyond limitation.

Issues Involved

  1. Whether a penalty of Rs.50,000 imposed under Section 125 — which prescribes a maximum penalty of Rs.25,000 — is sustainable.
  2. Whether the order, passed without any opportunity of hearing, can stand regardless of the quantum issue.

Petitioner's Arguments

  • The penalty of Rs.50,000 was imposed without any opportunity of hearing.
  • Section 125 itself caps the maximum imposable penalty at Rs.25,000, so the order was doubly infirm — mechanical in its reasoning and contrary to the statutory ceiling.

Respondent's Arguments

  • Learned Standing Counsel appeared for the State; the order records no substantive defence of either the quantum or the absence of hearing.

Court Order / Findings

  • Considering that no opportunity of hearing had been granted or was reflected anywhere in the impugned order, the Court quashed both the penalty order dated 03.06.2024 and the appellate order dated 07.04.2025 dismissing the appeal on limitation.
  • The matter was remanded to the authority concerned to pass a fresh order after granting an opportunity of hearing in accordance with law; the writ petition was allowed with these observations.

Important Clarification

  • A residual penalty under Section 125 of the CGST Act cannot exceed Rs.25,000, and any order imposing a higher amount is void on that ground alone, independent of any procedural defect.
  • Here, both the excessive quantum and the complete absence of a hearing combined to vitiate the order, illustrating that departments must observe both the statutory cap and the mandatory hearing requirement even for comparatively minor residual penalties.

Sections Involved

  • Section 125, CGST Act, 2017 — general (residual) penalty provision, capped at Rs.25,000 for contraventions with no separately specified penalty.
  • Section 75(4), CGST Act, 2017 — mandatory personal hearing before an adverse order.
  • Section 107, CGST Act, 2017 — limitation for filing an appeal.

Decision – In Favour of

The decision is in favour of the assessee. Both the penalty order and the appellate rejection were quashed, and the matter remanded for a fresh order after hearing.

Case Details

Court: High Court of Judicature at Allahabad, Lucknow Bench
Case No.: Writ Tax No. 645 of 2025; Neutral Citation 2025:AHC-LKO:41737
Coram: Hon'ble Justice Pankaj Bhatia
Date of Order: 22.7.2025

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