Sriram Traders Vs State of U.P. (Allahabad High Court)
In Sriram Traders Vs State of U.P., the Allahabad High Court quashed a penalty order imposed under Section 125 of the GST Act, ruling that it violated the principles of natural justice. The petitioner had challenged the order, which levied a penalty of ₹50,000, arguing that it was passed without providing any opportunity for a hearing. The court noted that the order did not reflect that any hearing had been granted. The court also observed that the penalty amount was incorrect as the maximum penalty imposable under Section 125 of the GST Act is ₹25,000. Citing the lack of a hearing, the High Court set aside the order and remanded the matter to the concerned authority. The authority was directed to issue a fresh order after giving the petitioner an opportunity to be heard in accordance with the law.
Section 125 of the GST Act is a residuary penalty provision that applies when a person contravenes any provisions of the Act or its rules for which no separate penalty is specifically prescribed. It empowers the authorities to impose a penalty up to ₹25,000 on such defaults. The section is meant to cover minor or procedural lapses not addressed elsewhere, but it must be applied in line with the principles of natural justice—meaning the taxpayer should be given notice and an opportunity to be heard before any penalty is imposed.
