TaxTMI 
TaxTMI 
TaxTMI 
1. Section 125 is uniformly applied with closed eyes in several GST adjudication orders irrespective of the violation being minor, due to procedural lapse and unintentional. The section is reproduced as such and analysed below.
2. 125. Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty five thousand rupees.
3. This section requires to be interpreted in a specified manner if at all we have clearly understood the legislative intent of this section. It conveys several requirements for proper application of the section. A) to be applied only when there is a contravention. B) there should not be any penalty which is payable under any other provisions C) A penalty when levied under some other section or rules, mandates the requirement that there should not be levy of simultaneous penalty under section 125 also. D) The penalty is not uniform in all cases. In may vary from any amount up to 25,000 depending upon the contravention.
4. In practice, even for minor, unintentional and procedural errors, a maximum penalty is imposed at 50,000 as wherever CGST applies, SGST or UGST is also applicable.
5. The Allahabad High court on 11/04/2025 in writ tax 327 of 2025 in the matter of M/s Sriram Traders Thru. Prop. Ajay Kumar Gupta And Another Versus State Of U.P. Thru. Prin. Secy. State Tax Civil Sectt. Lko And Another - 2025 (4) TMI 1233 - ALLAHABAD HIGH COURT examined the section 125 and made several observations.
6. The main challenge was on levy of penalty of Rs. 50,000/= under GST Law in a mechanical manner even without offering the opportunity of personal hearing. The court observed that levy of 50,000 as penalty mechanically in all cases is contrary to the mandate of Section 125 of the GST.
7. The operative portion reads as “considering the fact that no opportunity of hearing has been granted or is reflected in the said order, the order dated 20.01.2023 is quashed. The matter is remanded to the authority concerned to pass a fresh order after giving an opportunity of hearing in accordance with law”.
8. The writ petition was allowed in favour of the petitioner. This decision conveys a strong message to proper officers who pass adjudication orders to apply section 125 judiciously in line with the legislative intent and not in a mechanical manner.
9. It may be noted that in most of the orders levying late fee on delayed filing of GSTR, over and above the late fee, penalty of 50,000 is also levied simultaneously keeping the collection in mind. This is not correct as section 125 is attracted only on cases for which no separate penalty is leviable. Conveniently, the stand taken by tax officials is that late fee is not a penalty which is incorrect as late fee is nothing other than penalty but under a different name.
10. Interestingly, the issue of simultaneous levy of late fees as well as penalty for delay in filing GSTR was examined by the Madra High Court on 19/06/2025 in W P 21480 of 2025 in the matter of Tvl. Sri Ganesh Murugan Modern Rice Mill (Represented by its Proprietor Jaiganesh) Versus The State Tax Officer, The Branch Manager, Canara Bank, Kallakurichi - 2025 (8) TMI 553 - MADRAS HIGH COURT. As both late fee as well as penalty under section 125 were levied simultaneously, the court observed that section 125 is not applicable as levy of late fee under section 47 is in the nature of penalty and accordingly set aside the order passed by first respondent and also ordered for defreezing the bank account upon payment of late fee. Refer 2025 (8) TMI 553 Madras High Court.
11. Thus it is made abundantly clear by two high courts that section 125 has only limited applications based on the quantum of contravention and mechanical application of section 125 is incorrect.
12. Tax officials and tax professionals may take note of the above happenings and save the taxpayer from incorrect levies.