Imposition of General Penalty Exceeding Statutory Cap Under Section 125 Is Illegal and Quashed

By | October 28, 2026
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Imposition of General Penalty Exceeding Statutory Cap Under Section 125 Is Illegal and Quashed

Issue

  • Whether the imposition of a general penalty of ₹50,000 under Section 125 of the U.P. GST Act is legally sustainable when it exceeds the maximum statutory limit prescribed under the law and the taxpayer has already filed returns and paid the applicable late fee.

Facts

  • The petitioner filed the requisite GST return and paid the full late fee as mandated by law.
  • Following the issuance of a Show Cause Notice (SCN), the tax authority passed a penalty order imposing a general penalty of ₹50,000 under the U.P. Goods and Services Tax Act.
  • The petitioner invoked the writ jurisdiction of the High Court, challenging the penalty order on the ground that the amount imposed exceeded the maximum statutory ceiling permitted under Section 125.

Decision

  • The High Court noted that the petitioner had duly filed the return and discharged the late fee in accordance with the law.
  • It was held that the penalty amount of ₹50,000 exceeded the maximum limit prescribed under Section 125 of the U.P. GST Act.
  • Because the statutory cap was breached, the impugned Show Cause Notice and the consequential penalty order were quashed.
  • The writ petition was disposed of entirely in favor of the assessee.

Key Takeaways

  • Strict Adherence to Statutory Caps: Tax authorities cannot impose penalties under Section 125 exceeding the statutory limits defined by the legislature (maximum ₹25,000 under CGST and ₹25,000 under SGST/UTGST, totaling ₹50,000 across both acts only where applicable, or subject to specific limits per act).
  • Invalidity of Penalty Post Compliance: When a taxpayer has fulfilled statutory compliance by filing returns and paying the prescribed late fee, levying arbitrary or excessive general penalties is legally unsustainable.
  • Writ Jurisdiction Against Ultra Vires Orders: Penalty orders that breach statutory thresholds or proceed without authority of law are liable to be quashed under writ jurisdiction.
HIGH COURT OF ALLAHABAD
Omega Slayers (P.) Ltd.
v.
Commissioner Commercial Tax State Tax Lko
Shekhar B. Saraf and Amitabh Kumar Rai, JJ.
WRIT TAX No. 1304 of 2026 †
OCTOBER  16, 2026
Vikas Singh and Raja Babu Gupta for the Petitioner.
ORDER
1. Heard Shri Vikas Singh, learned counsel for the petitioner and Shri Sanjay Sarin, learned Additional Chief Standing Counsel appearing on behalf of State.
2. This is a writ petition under Article 226 of the Constitution of India wherein the writ petitioner has prayed for the following substantial relief(s):
“i. Issue a writ, order or direction in the nature of certiorari quashing the impugned Penalty Order dated 05.04.2025 bearing Reference No. ZD0904252017298, passed by the Assistant Commissioner, State Tax, Lucknow Sector-14, whereby a penalty of ₹25,000/-under CGST and 25,000/- under SGST, aggregating to ₹50,000/-, has been imposed upon the petitioner under Section 125 of the CGST/UPGST Act, 2017; Contained in Annexure No.1 to this writ petition, in the interest of justice.
ii. Issue a writ, order or direction in the nature of certiorari quashing the consequential Form GST DRC-07 dated 5.04.2025 bearing Reference No.ZD0904252017298 to the extent it creates the aforesaid penalty liability against the petitioner;
iii. Issue a writ, order or direction in the nature of mandamus directing the respondents not to recover or enforce the impugned penalty of 50,000/- against the petitioner pursuant to the aforesaid impugned order and DRC-07;
iv. Issue an appropriate writ, order or direction holding that, in the facts of the present case, where the petitioner subsequently furnished its GSTR-3B for February, 2025, discharged the entire tax liability of 50,688/- through the available input tax credit and also paid the applicable late fee, the imposition of the maximum general penalty under Section 125 is arbitrary, disproportionate and unsustainable in law.”
3. It is to be noted that the petitioner has already filed his return and has paid the late fees in accordance with law. Further more, the impugned penalty order dated 05.04.2025 is for a sum of Rs.50,000/- which exceeds the maximum limit provided under the U.P. G.S.T. Act, 2017.
4. In light of the same, impugned show cause notice and the impugned penalty order both are quashed and set aside.
5. In the aforesaid terms, the writ petition is disposed of.