The Madras High Court set aside ₹20,000 penalties in two cases involving tax of ₹2,880 and ₹324, holding that the officer had no power to penalise a minor breach under Section 126.
Where the tax involved is less than ₹5,000, the breach is a “minor breach” under Section 126 of the Central Goods and Services Tax Act, 2017, and the officer has no statutory power to impose a penalty, the Madras High Court has held [Royal Engineering Corporation v. Deputy State Tax Officer-2, Panruti & Anr., 2026-juristway.com-3461-HC(Madras)-GST].
Justice Krishnan Ramasamy partly allowed two writ petitions challenging orders of 8 Apr 2024 and 28 Aug 2024.
The disputed tax was ₹2,880 with interest of ₹2,256 in one case, and ₹324 with interest of ₹4,152 in the other. In each, a penalty of ₹20,000 (CGST and SGST combined) had been imposed. The petitioner’s bank account had been frozen.
Section 126(1) bars any officer from imposing a penalty for minor breaches of tax regulations or procedural requirements, in particular an easily rectifiable mistake in documentation made without fraudulent intent or gross negligence. Clause (a) of the Explanation treats a breach as minor where the tax involved is less than five thousand rupees.
The Additional Government Pleader fairly conceded that the amounts involved made these minor breaches.
Reading the Explanation, the Court held that since the tax in both cases was admittedly below ₹5,000, each was a minor breach, and “the respondent has no statutory power to impose a penalty”. The penalties of ₹20,000 were set aside.
The relief was confined to the penalty. The petitioner was directed to pay the disputed tax and interest within four weeks of receiving a copy of the order, and the bank was directed to de-freeze the account immediately on proof of that payment.
2026-juristway.com-3461-HC(Madras)-GST
