PENALTY UNDER SECTION 127

[Sadanand Bulbule]

Dear experts

Plz peruse the following:

Power to impose penalty in certain cases.

127. Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 ¹[or section 74A] or section 129 or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person.

Query:

What is amount of penalty leviable under Section 127? And what are the specific certain cases to invoke this section?

Plz elaborate.

[KASTURI SETHI]

Sh. Sadanand Bulbule Ji,

Sir, In my opinion, Section 127 is not totally blind. It is a 'legalized trap' to harness those offence (s) whatever is left in other Sections. It is required to counteract legal and technical problems so that the offenders/defaulters must not go scot free in any way. In other words, this Section closes all escape routes.

 

[Sadanand Bulbule]

Dear Sir 

I do agree. My concern is about non-clarity of situation and the amount of penalty leading to ambiguity. This may tempt the authorities to misuse it. 

[KASTURI SETHI]

Dear Sir,

Right, Sir. Your concern is genuine and is in the interest of tax-payers. Section 127 needs amendment to this effect.

[Sadanand Bulbule]

Dear Sir

What is the apparent benefit of Section 127 to the revenue is not known.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, The primary objective of Section 127 is to penalise the offender/defaulter/tax evader for the offences not covered in the aforesaid Sections. When any person performs statutory duty/function, that person is not concerned with any type of benefit. However, secondary benefit (bye-product) is that Govt. earns revenue in the form of recovery of penalty.

[KASTURI SETHI]

Dear Sir,

In continuation of my above observations :-

"Non-imposition of penalty is no revenue loss". -----------CESTAT

In contrast, my view is  that   imposition of penalty is revenue gain.

[VENU K]

In Sec 127 the focus is on whether the penalty specified in Sec 122, 125 etc are being imposed during an already open proceedings or not. If the penalty is planned to be imposed under Sec 122 or even 125 in any proceedings that are not open as mentioned in Sec 127, then, the way to go is by invoking Sec 127. In my opinion Sec 127 needs to be compulsorily invoked whenever proceedings are not initiated or open with regard to assessment (Sections: 62, 63, 64) or adjudication (Sec 73,74) detention and seizure (Sec 129) or Confiscation (Sec 130). This is a machinery provision for imposing penalties in circumstances that are not part of already open proceedings. For example, if a registered dealer has not displayed his GSTIN number as mandated the Officer may impose a penalty independently by invoking Sec 127. This being a machinery provision, the quantum of penalty shall be as per Sec 122 or 125 or any other applicable provision.

All the mentioned provisions in 127 (62, 63, 64,73,74,129,130) have their own specific code of due process laid down. If the officer wants to impose some other penalty outside these already open proceedings he has to invoke Section 129 which has inbuilt provisions for principles of natural justice.

[Sadanand Bulbule]

For non display of name board with GSTIN by a taxpayer, a maximum penalty of Rs.25000/- can be levied under Section 125 of the CGST Act. 

[VENU K]

The point I am trying to highlight is that if such a penalty for non display of name board is sought to be imposed, then, it has to be invoked under Sec 127 read with Sec 125 if it is not in connection with any proceedings that is already in progress.

AI Summary

Residual penalty power where no specific penalty provision applies: officer discretion exists but quantum and limits remain unclear.
Section 127 provides a residuary procedural power for a proper officer to levy penalty where contraventions are not covered by specified assessment, adjudication or seizure/confiscation proceedings; it requires a reasonable opportunity to be heard but does not itself prescribe the quantum of penalty, producing uncertainty about whether applicable penalty amounts derive from general or other specific penalty provisions and prompting calls for administrative or legislative clarification.