Facts of the Case

The petitioner, M/S Raj And Company, through its proprietor Mahesh Chandra Dubey, challenged an order dated 26.10.2024 imposing a general penalty of Rs.50,000 under Section 125 of the GST Act, as well as the subsequent appellate order dated 07.04.2025 dismissing its appeal as time-barred.

Issues Involved

  1. Whether a penalty under Section 125 of the GST Act, exceeding the statutory maximum of Rs.25,000, can be sustained.
  2. Whether the penalty order was validly passed in the absence of an opportunity of hearing.

Petitioner's Arguments

  • The penalty of Rs.50,000 was imposed under Section 125 of the GST Act without granting any opportunity of hearing.
  • Section 125 prescribes a maximum penalty of Rs.25,000, and the order imposing Rs.50,000 was mechanical and contrary to the express mandate of the provision.

Respondent's Arguments

  • The order was defended by the Standing Counsel for the State, though the record did not reflect that any opportunity of hearing had been granted before the penalty was imposed.

Court Order / Findings

  • Justice Pankaj Bhatia noted that no opportunity of hearing had been granted, nor was any such opportunity reflected in the impugned order.
  • The orders dated 26.10.2024 and 07.04.2025 were quashed, and the matter 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 the aforesaid observations.

Important Clarification

  • A general penalty under Section 125 of the GST Act cannot exceed Rs.25,000; any order imposing a higher amount is contrary to the statute regardless of the facts of the case.
  • As with substantive tax demand orders, a penalty order under Section 125 also requires a genuine opportunity of hearing before it can be passed.

Sections Involved

  • Section 125, Central Goods and Services Tax Act, 2017 — general penalty, capped at Rs.25,000, for contraventions not otherwise specifically penalised.

Decision – In Favour of

In favour of the Assessee — both the penalty order and the appellate dismissal were quashed, and the matter remanded for fresh adjudication after a proper hearing.

Case Details

Court: High Court of Judicature at Allahabad, Lucknow Bench
Case No.: Writ Tax No. 646 of 2025
Neutral Citation: 2025:AHC-LKO:41744
Coram: Hon'ble Pankaj Bhatia, J.
Date of Order: 22.07.2025

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