M/S Sriram Traders Thru.Prop. Ajay Kumar Gupta And Another vs. State Of U.P. Thru. Prin. Secy. State Tax Civil Sectt. Lko And Another

Facts

The petitioner, M/s Sriram Traders, through its proprietor Ajay Kumar Gupta and another, filed a writ petition challenging an order dated January 20, 2023. This order imposed a penalty of Rs. 50,000 under Section 125 of the GST Act. The petitioner contended that the penalty was imposed without providing an opportunity of hearing. Furthermore, the petitioner argued that Section 125 of the GST Act prescribes a maximum penalty of Rs. 25,000, making the imposed amount contrary to the statutory provision. The impugned order was passed by an unnamed authority under the State Tax department.

Held

The Court held that the order dated January 20, 2023, imposing a penalty of Rs. 50,000 under Section 125 of the GST Act, was unsustainable on two grounds. Firstly, the penalty amount exceeded the maximum limit of Rs. 25,000 prescribed by Section 125 of the GST Act. Secondly, and crucially, the order was passed without granting the petitioner an opportunity of hearing, thereby violating the principles of natural justice. The Court found that the absence of any reflection of a hearing in the impugned order was a fatal flaw. Consequently, the Court quashed the order dated January 20, 2023. The matter was remanded to the concerned authority to pass a fresh order after providing the petitioner with an adequate opportunity of hearing, in accordance with the law.

Key Issues

1. Whether the penalty of Rs. 50,000 imposed under Section 125 of the GST Act is sustainable when the maximum penalty prescribed under the said section is Rs. 25,000? (Question of law turning on Section 125 of the GST Act). 2. Whether the order imposing penalty is vitiated by non-compliance with the principles of natural justice, specifically the requirement of providing an opportunity of hearing? (Question of law turning on principles of natural justice and Section 125 of the GST Act). Petitioner's arguments: The petitioner argued that the penalty amount of Rs. 50,000 exceeded the maximum limit of Rs. 25,000 stipulated in Section 125 of the GST Act. They also contended that the order was passed mechanically without affording them any opportunity of hearing, which is a violation of Section 125 and the principles of natural justice.