Facts of the Case

M/S Raj And Company, a proprietorship represented by Mahesh Chandra Dubey, challenged an order dated 08.07.2024 imposing a penalty of Rs.50,000 under Section 125 of the GST Act, 2017 (the general/residuary penalty provision), along with the appellate order dated 07.04.2025 dismissing its statutory appeal as time-barred. The petitioner contended that the penalty had been imposed without granting any opportunity of hearing and, more significantly, that Section 125 itself caps the maximum penalty imposable at Rs.25,000 — meaning the Rs.50,000 penalty was mechanically imposed in clear excess of the statutory ceiling. Aggrieved by both the quantum and the manner of imposition, the petitioner approached the Allahabad High Court, Lucknow Bench.

Issues Involved

  1. Whether a penalty imposed under Section 125 of the GST Act in excess of the statutory maximum of Rs.25,000 can be sustained.
  2. Whether imposition of penalty without any opportunity of hearing violates principles of natural justice.
  3. Whether the impugned orders warrant being quashed and the matter remanded.

Petitioner's Arguments

  • The penalty of Rs.50,000 was imposed under Section 125 without giving any opportunity of hearing.
  • Section 125 of the GST Act prescribes a maximum penalty of Rs.25,000; the order imposing double that amount is contrary to the express statutory mandate.
  • The order was mechanical and did not reflect any application of mind to the statutory cap.

Respondent's Arguments

  • No specific justification was placed on record by the State to controvert the absence of a hearing opportunity before the impugned order was passed.

Court Order / Findings

  • The Court noted that no opportunity of hearing had been granted, and this was not reflected anywhere in the impugned order.
  • The order dated 08.07.2024 imposing the Section 125 penalty and the appellate order dated 07.04.2025 were both quashed.
  • The matter was remanded to the concerned authority to pass a fresh order after giving the petitioner a proper opportunity of hearing, in accordance with law.

Important Clarification

  • Section 125 of the GST Act, being the residuary/general penalty provision, is subject to an express statutory ceiling of Rs.25,000; any penalty order exceeding this ceiling is liable to be set aside regardless of the underlying contravention alleged.
  • A penalty order passed without granting a hearing, where none is reflected on the face of the order, cannot be sustained even on a limited writ challenge.

Sections Involved

  • Section 125, CGST/UP GST Act, 2017 — general penalty for contraventions with no separate penalty specified, capped at Rs.25,000.
  • Section 107, CGST/UP GST Act, 2017 — statutory appeal and limitation.

Decision – In Favour of

Assessee. Both impugned orders were quashed and the matter remanded for a fresh order after affording an opportunity of hearing.

Case Details

High Court of Judicature at Allahabad, Lucknow Bench; Writ Tax No. 653 of 2025; Neutral Citation No. 2025:AHC-LKO:41745; Coram: Hon'ble Pankaj Bhatia, J.; Order dated 22.07.2025.

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