Allahabad High Court Issues Notice On Plea Challenging S.127 CGST Act Over 'Unbridled' Power Given To Authorities To Impose Penalty On Assessee

Section 127 of the Central and State Goods and Service Tax Act, 2017 empowers the proper officer to impose penalty when he is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 [or section 74A] or section 129 or section 130. Such penalty may be imposed after giving a reasonable opportunity of being heard to such person.

Petitioner was issued an order under Section 127, which he allegedly came to know of in 2025. It has been pleaded that the orders were neither sent to the petitioner nor uploaded on the portal. Petitioner, in the writ petition, submitted that proceedings under Section 74 were initiated regarding transactions made by the petitioner with another assesee, which were later dropped.

On the same day, a show cause notice was issued under Section 127 for the same transactions and subsequently the impugned order was passed. Petitioner pleaded the Section 127 did not confer a power on the authorities to review their earlier position without new circumstances and facts arising.

Challenging Section 127 of the GST Act, petitioner has pleaded that there are various mandatory provisions in the Act governing sale/ supply of goods and services, and Section 127 will not apply in where such specific provisions are provided. It has been argued that Section 127 gives authorities 'unbridled, un-channelized and unregulated powers' to impose penalties on the assesee.

It has been submitted that Sections 62, 63, 64, 73, 74, 129 and 130 give ample powers to the authorities and provides a mechanism for imposition of tax whereas there is no mechanism for exercise of powers under Section 127. Accordingly, the provision and the order imposing penalty on the petitioner under section 127 have been challenged before the High Court.

The matter is before the division bench of Justice Shekhar B. Saraf and Justice Praveen Kumar Giri. It has been directed to be listed on 8^th October 2025.

Case Title: Shree Balaji Aromatics Pvt. Ltd v. State of U.P. and Another

Counsel for petitioner: Abhinav Gaur, Abhinav Mehrotra, Bhavna Mehrotra, Satya Vrata Mehrotra