100% penalty under sec122 of gst act

[giri gattupalli]

respected sir,

one of my client executed works contracts to govt tax departments during FY 2021-22 and nil returns filed during FY 2021-22 after finding lapses, but before issuance of any notice by department we have discharged total liability at 12% amounting to RS 25,00,000 by way of filing FORM -DRC-03 in june-2022 with interest and intimated to department

now in July 2025 my client received notice from department invoking SEC 122 of CGST ACT asking to pay 100 % penalty amounting to Rs 25,00,000 as the tax amount did not remitted to govt with in three months of tax collection.

i request our respected members please to discuss whether 100 % penalty under sec 122 can be invoked where alleged tax liability already discharged .

thanking you sir

Giri

advocate & tax consultant

[Sadanand Bulbule]

Dear Sir

Plz refer the following case law:

Mahadev Construction Co Vs. Union of India-2020(33) G.S.T L.230 (Jharkhand HC)

Held: Section 122 is a penal in nature, and must be interpretated strictly. Unless it is proved that taxpayer committed specified acts like fraud or misrepresentation of facts, equal penalty is not justified.

So, in my opinion nominal penalty may be levied under Section 125 of the Act.

[giri gattupalli]

respected sir 

thanks to your response and i request other members to continue discussion

thanking you

[giri gattupalli]

respected sir,

please continue discussion and give your valuable inputs . case is heading towards legal  dispute with dipartment.

thanking you

 

[Sadanand Bulbule]

2025 (7) TMI 1065 - DELHI HIGH COURT Vinod Kumar Goyal Individual Authorised Representative Vmg Foods Pvt. Ltd. Balraj Kumar Versus The Principal Commissioner Of Central Tax Delhi North & Anr.

 

AI Summary

Penalty under Section 122: equal penalty contested where tax was voluntarily paid with interest before notice. Whether a 100% penalty may be imposed under Section 122 where the taxpayer voluntarily paid the alleged tax liability with interest before any notice; forum replies stress that Section 122 is penal and must be strictly construed, that equal penalty ordinarily requires proof of fraud or misrepresentation, and that a nominal penalty under other penalty provisions may be appropriate where misconduct is not established.