PENALTY UNDER SECTION 127-JURISDICTION & SUSTAINABILITY

[Sadanand Bulbule]

Dear experts

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 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.

Section122 covers categorical offences and the amount of penalty is fixed for each such offence. That being the legal position, can penalty still be levied under Section 127 for the offences covered by Section 122? Does it not amount to by-passing the provisions of Section 122 which has clear-cut nature of offences? Does such penalty sustainable?

Plz clarify in detail.

[Sadanand Bulbule]

Are authorities now in a position to understand the specific purpose behind Section 122 & 127, which are exclusively independent to impose penalty in peculier circumstances?

[YAGAY andSUN]

Section 127 of the CGST Act, 2017 operates independently and confers a residual power on the proper officer to impose penalty in cases not falling under the proceedings specified therein, including where the offence does not attract penalty under Sections 122, 129, or 130. However, where a contravention is specifically covered under Section 122, the penalty must be levied strictly under that section, as it prescribes definitive offences and corresponding penalties. Invocation of Section 127 for offences squarely falling under Section 122 would be ultra vires and unsustainable in law, as it would defeat the legislative intent of having codified offences and penalties. Section 127 is not a substitute for Section 122 but rather a residuary provision meant to address contraventions not specifically enumerated elsewhere in the Act.

[Sadanand Bulbule]

Dear Sir

Thanks for your clear inputs. By the way, I am curious to know why the quantum of penalty to be levied under Section 127 of the CGST Act is not prescribed, unlike other penal provisions? In such an undefined situation, what should be the justification of the department and the taxpayer as well? Is it discretionery depending upon the gravity of each case? Or else,is it required to sink with the provisions of Section 126 - governing general discipline to penalties?

Plz enlarge your comments.

[YAGAY andSUN]

Section 127 of the CGST Act, 2017 operates as a residuary penal provision, empowering the proper officer to impose a penalty in cases where no specific penalty is separately prescribed under other sections such as Sections 122 to 125, 129, or 130. However, it deliberately does not prescribe a fixed quantum of penalty, thereby vesting the officer with guided discretion. This discretion is not absolute but is circumscribed by the mandatory principles enshrined under Section 126, which lays down the general discipline for penalty imposition. Accordingly, any penalty levied under Section 127 must be proportionate to the gravity of the contravention, subject to natural justice, and should exclude minor breaches or technical lapses devoid of fraudulent intent or gross negligence.

In such undefined situations, the department is bound to justify the penalty on a reasoned basis reflecting the factual matrix, degree of culpability, and observance of procedural fairness. Conversely, the taxpayer is entitled to contest any penalty that appears arbitrary, excessive, or non-compliant with Section 126. Judicial pronouncements have consistently held that where penalty provisions do not stipulate a specific amount or percentage, the exercise of discretion must be reasonable, proportionate, and amenable to judicial scrutiny under the doctrine of proportionality and principles of natural justice.

[Sadanand Bulbule]

Much obliged sir 

AI Summary

GST penalties under Section 127 cannot be imposed for offenses already covered under Section 122's specific provisions A GST practitioner inquired whether penalties can be imposed under Section 127 for offenses already covered under Section 122, which prescribes specific penalties for categorical offenses. An expert clarified that Section 127 operates as a residuary provision for contraventions not specifically covered elsewhere, and using it for Section 122 offenses would be ultra vires. The discussion further explored that Section 127 grants guided discretion without fixed penalty amounts, requiring compliance with Section 126's proportionality principles and natural justice standards when determining penalty quantum.