In a recent ruling, the Madras High Court said the minimum penalty of ₹10,000 under Section 73(9) of the GST (Goods and Services Tax) Act cannot be automatically imposed for minor violations under Section 126(1).
While quashing a GST assessment order passed without a hearing, Justice Senthilkumar Ramamoorthy observed that the petitioner’s alleged violation appeared, prima facie, to be a ‘minor violation’.
The Court also noted that while Section 73 provides for a minimum penalty, Section 74 contains no such stipulation.
Shri Shakti Ganapathi Tex approached the High Court to contest the GST order. They argued that the order violated the principles of natural justice and contended that their lapse constituted a minor violation.
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As per Section 126(1) of the GST Act, 2017, no officer shall impose a penalty for minor breaches of tax regulations or procedural requirements, provided they are rectifiable and committed without any fraudulent intent.
In its explanation, the provision states that ‘a breach shall be considered a “minor breach” if the amount of tax involved is less than five thousand rupees’.
The applicant claimed that his breach falls under the purview of section 126(1). Thus, levying a minimum penalty for a minor violation is unreasonable. The company considered remitting the tax amount as a condition for remand.
The Court took note of the distinct penalty structures under Section 74(1) and Section 73(9). It observed that while Section 74 does not prescribe a minimum penalty, Section 73 does. According to the Court, this disparity makes the provision open to a challenge on constitutional grounds.
Since the petitioner did not raise the issue of constitutionality, the Court declined to express any further opinion on it.
The bench examining the violation of principles of natural justice found that the allegation against the petitioner was, prima facie, a minor infraction; therefore, the bench ordered the matter to be remanded after the petitioner deposited the disputed amount.
The GST department was asked to pass a fresh order within 5 months from the date of depositing the tax amount by the applicant.
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While disposing of the petition, the Court granted the petitioner permission to challenge the relevant provisions and directed the department to lift the bank attachment based on the deposited amount.
| Case Title | Sri Sakthi Ganapathy Tex vs. The Deputy State Tax Officer-1 |
| Case No. | WP No. 35549 of 2026 |
| For Petitioner | Mr S.Satheesh Kumar, Mr T.Suresh |
| For Respondent | Mr.R.Sethu Prabakaran |
| Madras High Court | Read Order |
