IMPOSING OF GENERAL PENALTY UNDER GST ACT

Section 125 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides that where a person contravenes any provision of the Act or the Rules made thereunder for which no penalty is separately provided, he is liable to a penalty which may extend to Rs.25,000/-.

The essential conditions for imposing the general penalty under Section 125 of the Act are as below-

• There must be a contravention of the Act or Rules;
• The contravention must be established against the person;
• No separate penalty should be prescribed elsewhere in the Act for that contravention.

The said penalty shall not be automatic. The expression may extend to Rs.25,000/- gives the proper officer discretion regarding the quantum. The penalty must be proportionate to the breach. Section 126 provides the general disciplines relating to penalty. The Proper Officer shall not impose penalty for a minor breach of tax regulations or procedural requirements or an omission /mistake in documentation which is easily rectifiable, where it was made without fraudulent intent or gross negligence. A breach is called as a minor breach if the tax involved is less than Rs.5000/-.  An error apparent on the face of the record is an easily rectifiable error. No penalty shall be imposed on any person without giving him an opportunity of being heard.

Section 126(4) of the Act requires the officer to specify the nature of the breach and the applicable law, regulation or procedure under which the general penalty is imposed.

If any of the provision of the Act specifically provides a penalty for a particular contravention the Department cannot by pass that provision and impose a general penalty under section 125 of the Act.

In Kamal Envirotech Pvt. Ltd., and M/s. Zeon Life Sciences Ltd. Versus Commissioner of GST And Anr., Chief Secretary, Government of Delhi & Ors. - 2025 (1) TMI 983 - DELHI HIGH COURT the High Court analysed the provisions of Section 125 and 126 of the Act and held that-

• Section 125 is a residual provision;
• The words ‘may extend to’ indicate discretion;
• Section 126 requires the consideration of the facts and circumstances;
• Penalty must be commensurate with the degree and severity of the breach;
• Minor breaches and easily rectifiable mistakes without fraudulent intent or gross negligence should not attract penalty.

In Caussa Tec Solutions Pvt. Ltd. Versus Assistant Commissioner (ST), The Deputy Commissioner (ST), Chennai - 2026 (6) TMI 52 - MADRAS HIGH COURT, the petitioner was issued with a show cause notice by the Department in DRC – 01 on 03.01.2025. The petitioner filed reply to the said show cause notice. Personal Hearing was fixed on 20.01.2025. Since the petitioner did not apply for the personal hearing, the Department against fixed the personal hearing on 28.08.2025. The petitioner also did not appear before the Proper Officer on that date also. Again, the Department offered a personal hearing to the petitioner on 07.11.2025. Finally, the personal hearing was given on 18.11.2025. The petitioner did not attend this hearing also. Therefore, the Department confirmed the demand in the show cause notice and ordered the tax payable @ Rs.95498 and general penalty of Rs.25000/- under CGST and also the same amount for SGST also.

The petitioner filed the present writ petition challenging the above said order imposing of general penalty. The High Court, on perusal of the impugned order, observed that the issue is at the moment covered by the decision of Madras High Court in Ms. Kandan Hardware Mart, Represented by its Proprietor E. Palani, M/s. Sharmila Plastics, Represented by its Proprietor Durai Raman, M/s. Agni Enterprises, Represented by its Proprietor S. Babu And Others The Assistant Commissioner (ST) (FAC), Chennai, State Tax Officer, Deputy Commissioner (ST) (FAC), Krishnagiri., HDFC Bank, Tamil Nadu And Others - 2026 (1) TMI 383 - MADRAS HIGH COURT .  The High Court, while dealing with a similar issue arising out of delay in filing of the “Annual Returns” in GSTR-9 under Section 39 of the respective GST Enactments held that it would be unjust to deny a “Late Fee”, waiver to a taxpayer who filed their Goods and Services Tax (GST) Annual Returns (GSTR-9 and GSTR-9C) before a specific Amnesty Notification was issued in Notification No.7/2023-Central Tax dated 31.03.2023, and was amended by Notification No.25/2023-Central Tax dated 17.07.2023. The High Court, therefore, held that the benefit of the above Notifications namely Notification No.7/2023-Central Tax dated 31.03.2023 as amended by Notification No.25/2023-Central tax dated 17.07.2023 has to be extended to all those Petitioners in Table – 4A who had filed the returns before 01.04.2023.

The High Court further held that since these Petitioners are liable to pay “Late Fee”, the question of imposing “General Penalty” under Section 125 of the respective GST laws cannot be countenanced in view of the reasons that “General Penalty” under Section 125 of the respective GST laws can be imposed only in the absence of ‘any other penalty’ under the respective GST laws. The Petitioners in Table-4A are neither liable for “Late Fee” over and above Rs.10,000/- under each of the respective GST Enactments nor liable for “General Penalty” under Section 125 of the respective GST Enactments.

The High Court held that since these Petitioners have also filed the “Annual Returns” before 01.04.2023, they cannot be subjected to “Late Fee” over and above Rs.10,000/- under each of the respective GST Enactments. The High Court set aside the general penalty imposed on the petitioners. The High Court partly allowed the appeal and directed the petitioner to pay the late fee.