Can Appeal order rectification apply for Penalty Under section 125

[SHARAD ANADA]

The Mobile squad officer has issued demand order u/s. 129 of CGST Act, 2017. Aggrieved by the order the RTP has filed an Appeal before First Appellate Authority(FAA). The FAA has allowed the Appeal but he imposed CGST penalty of Rs. 25000/- and SGST Penalty of Rs. 25000/- under Section 125.

Can FAA imposed penalty under section 125 which was never demanded in original order and secondly general penalty under section 125 can be imposed only where no separate penalty is provided. However specific penalty of 200% of tax amount has been provided under section 129.

Can RTP file Appeal order rectification Application under section 161 for drop of penalty under section 125

[Ryan Vaz]

Section 125: Section 125 of the CGST Act, 2017 provides for penalties for failure to comply with certain provisions. The section mentions specific penalties for default in payment of tax, interest on tax, and other related issues. One of the provisions under Section 125 is a penalty not exceeding 10% of the amount of service provided or utilized by the recipient.

Section 129: Section 129 of the CGST Act, 2017 provides for penalties for non-compliance with registration requirements. The section mentions specific penalties for failure to register, and another provision states that where any registered person has failed to comply with any provision of this Act or the Rules made thereunder, penalty at a rate not exceeding 200% of the tax amount due.

Can FAA impose penalty under Section 125 that was not demanded in original order? The answer is yes. The FAA can impose penalties under Section 125 even if they were not demanded in the original order. As per the principle of estoppel, when a party has accepted a benefit or a loss, they cannot go back on it later.

Can FAA impose general penalty under Section 125 without separate provision? The answer is no. As you mentioned, specific penalties are provided under Section 129 (200% of tax amount) and other sections (e.g., Section 125). If there is no specific provision for a penalty, the FAA cannot impose a general penalty under Section 125.

Can RTP file Appeal Order Rectification Application under Section 161 to drop penalty under Section 125? The answer is yes. The RTP can file an Appeal Order Rectification Application under Section 161 of the CGST Act, 2017, to drop the penalty imposed under Section 125. This application can be filed to rectify any errors or omission in the original order.

In conclusion:

• FAA can impose penalties under Section 125 even if they were not demanded in the original order.
• General penalty under Section 125 cannot be imposed without a specific provision for it.
• RTP can file an Appeal Order Rectification Application under Section 161 to drop the penalty imposed under Section 125.

[KASTURI SETHI]

Q. Can FAA imposed penalty under section 125 which was never demanded in original order ?

Ans. Yes. Read Section 107(11) of CGST word for word. Emphasis is laid on the phrase, " as it thinks just and proper,---modifying ----".

Q. and secondly general penalty under section 125 can be imposed only where no separate penalty is provided.

Ans. Your observation is correct.

Q. Can RTP file Appeal order rectification Application under section 161 for drop of penalty under section 125 ?

Ans. YES. Emphasis is laid on the wording, "ANY authority who has passed or issued any decision or order------------" contained in Section 161 of CGST. "ANY authority" covers Appellate Authority.

[YAGAY andSUN]

The issue involves two core legal questions under the CGST Act, 2017:

(i) whether the FAA is empowered to impose penalty under Section 125 when such penalty was not part of the original order passed under Section 129, and

(ii) whether rectification under Section 161 is maintainable for deletion of such penalty.

The original proceedings were initiated under Section 129 of the CGST Act, which is a special and self-contained provision dealing with detention, seizure, and release of goods in transit. Section 129 itself prescribes a specific penal consequence, i.e., payment of tax and penalty equivalent to 200% of the tax payable. Being a special provision, it overrides general penalty provisions in case of overlap.

Section 125 of the Act is a residuary penalty provision, applicable only where no specific penalty is provided elsewhere in the statute. Since Section 129 already contains a specific penal mechanism, invocation of Section 125 in such cases is legally debatable and may be considered inapplicable due to the principle that general provisions cannot override special provisions (generalibus specialia derogant).

Further, under Section 107, the FAA has appellate powers to confirm, modify, or annul an appealed order. However, such powers must remain within the scope of the original adjudication and subject matter of dispute. Imposition of a new penalty under Section 125, which was neither part of the original Section 129 order nor subjected to specific adjudication, may be challenged as being beyond jurisdiction and contrary to principles of natural justice, particularly if no notice for enhancement was issued.

With respect to Section 161, it permits rectification of errors apparent on the face of record within six months. If the imposition of Section 125 penalty is demonstrably a clear legal error arising from application of an inapplicable provision in a Section 129 case, it may qualify for rectification.

If the issue requires interpretation of law or adjudication on the interplay between Section 125 and Section 129, it may fall outside the limited scope of Section 161 and be treated as a substantive legal issue requiring appellate remedy before the GSTAT.

In conclusion, the imposition of Section 125 penalty in a Section 129 proceeding is legally arguable and susceptible to challenge, and while rectification under Section 161 can be attempted, the more effective remedy, if rejected, would be a further appeal before the GSTAT.

[Pinnacle Tax Advisor]

Question 1: Can the First Appellate Authority impose penalty underSection 125 which was never demanded in the original order?

Answer: Yes, the Appellate Authority has the power to enhance any fee or penalty. However, before doing so, it must provide the appellant with a proper opportunity of being heard. This requirement is specifically laid down in the first proviso to Section 107(11) of the CGST Act.

Question 2: General penalty under Section 125

Answer: Penalty for detention or seizure of goods during transit, due to non compliance with GST provisions is prescribed under Section 129. Therefore, in practice, penalty under Section 125 is generally not imposed in such cases, as Section 125 covers residual situations where no specific penalty is provided elsewhere.

Question 3: Rectification under Section 161 Answer: An application for rectification under Section 161 can be filed if there is an error apparent on the face of the record. You may consider whether the authority has made an unintentional error. However, if the authority has taken a deliberate view and imposed the amount intentionally, then instead of spending time on a rectification application and awaiting a response, filing an appeal before the Tribunal would be the more effective remedy.

AI Summary

Section 125 penalty in goods-in-transit disputes raises questions on appellate enhancement and rectification under GST law. Penalty under Section 125 in a Section 129 goods-in-transit dispute raises questions on appellate enhancement, the coexistence of general and specific penalty provisions, and rectification. The commentary notes that Section 129 contains a specific penalty mechanism, while Section 125 is described as residuary and ordinarily applicable only where no separate penalty is provided. It also discusses whether the First Appellate Authority may add a new penalty in appeal, whether notice and hearing are required, and whether Section 161 rectification can be used where the penalty is said to be an error apparent on the record.