- The levy of penalty is subject to a certain disciplinary regime which is based on jurisprudence, principles of natural justice and principles governing international trade and agreements. Such general discipline is enshrined in section 126 of the Act. Accordingly—
• no penalty is to be imposed without issuance of a show cause notice and proper hearing in the matter, affording an opportunity to the person proceeded against to rebut the allegations levelled against him,
• the penalty is to depend on the totality of the facts and circumstances of the case,
• the penalty imposed is to be commensurate with the degree and severity of breach of the provisions of the law or the rules alleged,
• the nature of the breach isto be specified clearly in the order imposing the penalty,
• the provisions of the law under which the penalty has been imposed is to be specified.
- Section 126 further specifies that, in particular, no substantial penalty is to be imposed for —
• any minor breach( minor breach has been defined as a violation of the provisions in a case where the tax involved is less than Rs.5000), or
• a procedural requirement of the law, or
• an easily rectifiable mistake/omission in documents (explained in the law as an error apparent on record)that has been made without fraudulent intent or gross negligence.
Further, wherever penalty of a fixed amount or a fixed percentage has been provided in the CGST/SGST Act, the same shall apply.
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