Penalty Under Section 122 Quashed Due To Non-Issuance Of SCN And Natural Justice Breach

By | July 25, 2026
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Penalty Under Section 122 Quashed Due To Non-Issuance Of SCN And Natural Justice Breach

Issue

  • Validity of Section 122 Penalty Issued Without SCN: Whether a penalty imposed for offences under Section 122 of the CGST/SGST Act can be legally sustained when the authorities fail to issue a prior Show Cause Notice (SCN) and deny a reasonable opportunity of hearing as mandated by Section 126.

Facts

  • Penalty Order Challenged: The petitioner filed a writ petition challenging an order to the extent that it imposed a penalty under Section 122 for alleged offences under the GST law.

  • Lack of SCN and Hearing: The petitioner asserted that no Show Cause Notice was issued prior to levying the penalty, and no reasonable opportunity of being heard was provided.

  • Statutory Requirement: Under the general disciplines related to penalty under Section 126, issuance of a prior notice and affording an opportunity of hearing are mandatory prerequisites before imposing any penalty.

Decision

  • Breach of Natural Justice (In favor of Assessee): Held YES. General discipline guidelines on penalty require a prior SCN and an opportunity of hearing; failing to issue an SCN breaches principles of natural justice and statutory mandates. [Para 5]

  • Penalty Unsustainable in Law (In favor of Assessee): Held YES. Non-compliance with mandatory procedural requirements vitiates the penalty order, rendering the impugned penalty legally unsustainable and liable to be set aside. [Para 5]

Key Takeaways

  • Mandatory Compliance with Section 126: Before imposing penalties under Section 122, tax authorities must strictly adhere to Section 126 by issuing a proper Show Cause Notice and extending a fair hearing.

  • Natural Justice Is Non-Negotiable: Omission of a prior notice or personal hearing invalidates consequential penalty orders, irrespective of the alleged underlying statutory offence.

HIGH COURT OF PUNJAB & HARYANA
Vikas Kumar Omar
v.
Principal Commissioner of CGST Commissionerate at Rohtak
Ashwani kumar Mishra, ACJ.
and Rohit Kapoor, J.
CWP 13203 of 2026 (O & M)
JULY  14, 2026
Mayank Jain, Adv. for the Petitioner. Sagar Ratusaria, Junior Standing Counsel for the Respondent.
ORDER
Ashwani Kumar Mishra, A.C.J.-This petition is directed against the impugned order dated 04.12.2025 contained in Annexure P-1, insofar as a penalty has been imposed upon the petitioner under Section 122 of the Central Goods and Services Tax Act, 2017 (for short, the ‘Act of 2017’).
2. A short ground on which the order is assailed is that no Show Cause Notice (SCN) was actually issued calling upon the petitioner to explain as to why a penalty should not be imposed upon him, and therefore, the order passed by the authority imposing the penalty clearly violates the principles of natural justice.
3. Learned counsel appearing for the revenue does not dispute the fact that no SCN in respect of the initiation of proceedings under Section 122 of the Act of 2017 against the petitioner had been issued.
4. Section 122 of the Act of 2017 provides for ‘Penalty for certain offences’. The general disciplines relating to penalty have been specified in Section 126(3) of the Act of 2017, which provides as under:-
“126 General disciplines related to penalty:-
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(3) No penalty shall be imposed on any person without giving him an opportunity of being heard.
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5. Since, in the present case, no SCN had been issued to the petitioner before imposing the penalty, there is an apparent noncompliance with the provisions contained in Section 126(3) of the Act of 2017. This non-compliance has resulted in a breach of the principles of natural justice by the respondents. On this ground alone, the imposition of the penalty, insofar as it relates to the present petitioner, cannot be sustained.
6. With these observations, the instant writ petition is disposed of.
7. All pending miscellaneous application(s), if any, shall also stand disposed of accordingly.