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Understanding Section 122 in GST: A Comprehensive Guide to Penalties
Section 122 in GST is a critical provision under the Central Goods and Services Tax (CGST) Act, 2017, that outlines penalties for certain offenses. It empowers authorities to impose fines on taxpayers for violations like tax evasion, issuing fake invoices, or failing to deposit collected GST. But when does it apply? And how have courts interpreted it? This blog breaks it down based on key judicial rulings, helping businesses navigate GST compliance without unnecessary penalties.
In most cases, penalties under Section 122 GST aim to deter willful misconduct rather than punish honest mistakes. However, courts have repeatedly emphasized that intent to evade tax is essential—minor delays or technical lapses often warrant only nominal fines, like Rs. 10,000. Let's dive deeper.
What Does Section 122 of the CGST Act Cover?
Section 122(1) lists specific offenses, such as:
- Supplying goods/services without issuing invoices.
- Issuing fake or incorrect invoices to claim undue Input Tax Credit (ITC).
- Failing to pay collected tax to the government.
Penalties can be up to 100% of the tax evaded or Rs. 10,000 (whichever is higher) for certain breaches. Section 122(1A), introduced later, allows penalties against non-registered persons involved in fake invoicing.
Authorities must issue a show-cause notice (SCN) before imposing penalties, ensuring a fair hearing. As seen in multiple cases, vague allegations without evidence don't justify harsh fines. Rajesh VS State Of Haryana - 2020 Supreme(P&H) 710
The purpose of Section 122 is to secure the realization of tax that has been evaded. Rajesh VS State Of Haryana - 2020 Supreme(P&H) 710
Key Principles from Court Rulings on Section 122 GST
Indian courts have clarified Section 122 GST through numerous judgments, stressing proportionality and intent. Here's a breakdown:
1. No Intent to Evade = Nominal Penalty
For late payments without evasion, penalties should be minimal. In one case, a manpower company faced a Rs. 56 lakh penalty for delayed GST deposit amid COVID-19 disruptions. The court reduced it to Rs. 10,000, noting no tax was evaded and a waiver notification applied. Clear Secured Services Private Limited VS Commissioner, State Tax GST, U. P. Commercial Tax, Lucknow - 2023 Supreme(All) 2830
- Maximum penalty for non-evasion: Often capped at Rs. 10,000 per instance under CGST/SGST guidelines.
- Hearing mandatory: Appellate authorities must consider mitigating factors like pandemics. Clear Secured Services Private Limited VS Commissioner, State Tax GST, U. P. Commercial Tax, Lucknow - 2023 Supreme(All) 2830
Similarly, in a raw cotton purchase case, deliberate non-payment under Reverse Charge Mechanism (RCM) justified Section 122(2) penalty, but only after proving liability via notifications. Anjani Cotton Industries Through Rajdeep Nagjibhai Saravda VS Principal Commissioner Of Central Goods And Services Tax - 2024 Supreme(Guj) 376
2. Distinction from Sections 129 & 130
Section 122 differs from detention/seizure under Section 129 (transit violations) or confiscation under Section 130. Courts quash 129/130 proceedings if no evasion intent exists, redirecting to Section 122 for minor fines.
- E-way bill expiry due to delays? Penalty under 122(ix) (Rs. 10,000), not 129(3). Shyam Sel and Power Limited VS State of U. P. - 2023 Supreme(All) 2801
- Excess stock found? Use Sections 73/74 for assessment, not 130. J. H. V. Steels Ltd. VS Union of India - 2024 Supreme(All) 2083
Intent to evade tax is a necessary condition for proceedings under Sections 129 and 130. Shyam Sel and Power Limited VS State of U. P. - 2023 Supreme(All) 2801
In an arecanut transport case, misclassification disputes led to detention, but courts released goods, directing assessment proceedings instead. N. V. K. Mohammed Sulthan Rawther and Sons Dindigul VS Union of India - 2018 Supreme(Ker) 760
3. Fraudulent ITC and Syndicate Cases
Harsh penalties apply to fake invoice rackets. Petitioners availing fraudulent ITC via bogus firms faced Rs. 4.34 crore penalties; courts upheld them, rejecting 'vague SCN' pleas if evidence showed syndicate involvement. Shankar Mundra vs Union of India - 2025 Supreme(Guj) 828
- Bogus billing scams: Prosecution under IPC + Section 122 possible; bail denied for key accused. Maheshdan Prabhudan Langa vs State of Gujarat - 2025 Supreme(Guj) 960, Rajesh VS State Of Haryana - 2020 Supreme(P&H) 710
A Rs. 80 crore evasion via 18 fake firms resulted in bail denial for masterminds. Rajesh VS State Of Haryana - 2020 Supreme(P&H) 710
4. Provisional Attachment and Related Powers
Section 122(1A) ties into Section 83 for attachments during probes. But attachments lapse after one year, and summoning powers under Section 70 can't freeze payments. Bharat Parihar VS State of Maharashtra Thr. PP Office - 2023 Supreme(Bom) 514, Sri Sai Balaji Associates VS State Of Andhra Pradesh - 2023 Supreme(AP) 1177
Provisional attachment under Section 83 ceases after one year. Bharat Parihar VS State of Maharashtra Thr. PP Office - 2023 Supreme(Bom) 514
5. Appeal and Alternative Remedies
Challenge penalties via Section 107 appeals before writs. Courts dismiss writs if appeals are pending, urging statutory remedies first. Balaji Enamil Industry VS Assistant Commissioner (ST), Nellore - 2022 Supreme(AP) 1376
In classification disputes (e.g., carbonated drinks as 'fruit juice' vs. 'aerated water'), unsustainable demands void penalties/interest. X`ss Beverage Co. vs State Of Assam - 2025 Supreme(Gau) 150
When Can Penalties Be Avoided or Reduced?
Taxpayers succeed by proving:
1. Bona fide disputes: E.g., contract terms shifting RCM liability. K.J.MATHEW, Vs STATE OF KERALA, - 2020 Supreme(Online)(KER) 13288
2. No cash liability: Reversed ITC means no interest under Section 50. Balaji Enamil Industry VS Assistant Commissioner (ST), Nellore - 2022 Supreme(AP) 1376
3. Proportionality: Expired e-way bills without fraud = Rs. 10,000 fine. Faruk Rathore Prop. Of M/s Hindustan Trading Company VS Dy. Commissioner, Central Goods And Service Tax - 2024 Supreme(Raj) 515
Authorities can't use Section 122 post Sections 73/74 initiation, as penalties are deemed dropped. Electronic City Motors vs Joint Commissioner of Central Tax, Bengaluru - 2025 Supreme(Online)(Kar) 99819
Broader Context: GST Enforcement Trends
Search results show Section 122 GST often invoked in:
- E-way bill lapses during transit. Kanak Timber House VS Assistant Commissioner of Sales Tax - 2024 Supreme(Cal) 560
- RCM non-compliance on purchases. Anjani Cotton Industries Through Rajdeep Nagjibhai Saravda VS Principal Commissioner Of Central Goods And Services Tax - 2024 Supreme(Guj) 376
- Fake firms and ITC fraud. Multiple states (Maharashtra, Gujarat, etc.) target syndicates. MAMTA GUPTA vs UNION OF INDIA - 2024 Supreme(Online)(Bom) 11070
Courts protect genuine traders, quashing overreach while upholding deterrence.
Key Takeaways
- Intent matters: Prove no evasion for nominal penalties (e.g., Rs. 10,000).
- Proceed proportionally: Use 122 for offenses, not detention (129/130).
- Appeal promptly: Section 107 is your first line of defense.
- Document everything: Contracts, e-way bills, and communications save cases.
Disclaimer: This post provides general insights based on public judgments and is not legal advice. GST matters vary by facts; consult a tax professional for your situation. Laws evolve—check latest notifications.
Stay compliant, and remember: Honest errors rarely lead to ruinous fines under Section 122 in GST.
Search Results for "Section 122 GST: Penalties Explained & Cases"
1993 0 Supreme(Del) 612 • India - Delhi
VUENDER JAIN, VIJENDER JAIN, D.P.WADHWA
Under Section 34 of the Companies Act, 1956, on the registration of the memorandum of a company the Registrar of the Companies is ... CONSTITUTION OF INDIA - Article 14-Award of Contracts by State-in respect of properties be longing to the State-can be judged and ... in the memorandum, capable forthwith #HL_S....
2014 0 Supreme(Ker) 680 • India - Kerala
ASHOK BHUSHAN, A.M.SHAFFIQUE, A.V.RAMAKRISHNA PILLAI, A.HARIPRASAD, A.K.JAYASANKARAN NAMBIAR
Co-operative Societies Act, Section - Co-operative Societies Act (Kerala), 1969 - Constitution of India, 1950 Article 12 and 226 ... statutory violation from the part of the society or breach of duty ... Writ petition is not maintainable as corporative society come under the per view of article 12 but is maintainable if there is any ... Section 122 of #HL_START....
1952 0 Supreme(Cal) 199 • India - Calcutta
CHAKRABARTI, DAS, BANERJEE, DAS GUPTA, S.R.DAS GUPTA
of India Act, 1915, or at the most, at the date of the Constitution, pursuant to Section 223 of the Act of 1935. ... of India Act, 1915, or at the most, at the date of the Constitution, pursuant to Section 223 of the Act....
2014 0 Supreme(SC) 385 • India - Supreme Court
S.S.NIJJAR, FAKKIR MOHAMED IBRAHIM KALIFULLA
10A - Whether the Election Commission, under Section 10A of the Representation of the People Act, 1951, can conduct an ... Representation of the People Act, 1951 - Section petitioner has now having come with the plea that advertisements were got published by Rashtriya Parivartan Dal and the ... be disqualified as prescribed under Section 122(1) of the#....
2019 0 Supreme(SC) 1107 • India - Supreme Court
ARUN MISHRA, M.R.SHAH, B.R.GAVAI
case of section 9A only the question of maintainability as question of law has to be decided as preliminary issue - Expression ‘ ... (a) Words and Phrases - Jurisdiction - Authority of law to act officially in a particular matter in hand ... comes before section 9A - Order VII Rule 11(d) has to be applied at the threshold - Scope of Section 9A ....
2020 0 Supreme(P&H) 710 • India - Punjab and Haryana
GURVINDER SINGH GILL
The purpose of Section 122 is to secure the realization of tax that has been evaded. ... GST Act - Section 122: The court held that the proceedings under Section 122 of the GST Act can continue in addition ... The accused have been charged under various sections of the Indian Penal Code (IPC) and the GST Act.....
2024 0 Supreme(Guj) 376 • India - Gujarat
BHARGAV D. KARIA, NIRAL R. MEHTA
The court referred to relevant provisions of the Central Goods and Service Tax Act, 2017 and the Notifications issued by the Central ... (RCM) for the purchase of raw cotton from agriculturists and the imposition of penalty under Section 122(2) of the GST Act. ... The penalty imposed under Section 122(2) of the GST#H....
2025 0 Supreme(Gau) 150 • India - IN THE HIGH COURT OF GAUHATI (HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
SOUMITRA SAIKIA
(Paras 185 - 188 ) (C) Penalty and interest - Penalty under Section 122 of the Assam GST Act and interest under ... Section 50 of the CGST Act not sustainable where demand is found non-sustainable. ... fruit drinks - Petitioners challenged classification of their products as aerated waters (28% GST) instead of fruit juice-based ... led to short payment of tax #H....
2024 0 Supreme(Cal) 560 • India - Calcutta
RAJA BASU CHOWDHURY
GST Act - Prohibition Order - Section 67(2), Section 67(7), Section 122 - The court discussed the provisions of Section 67(2) ... goods under Section 67(6) of the GST Act, and therefore, no case for interference was made out. ... , and the applicability of Section 67(7) of the GST Act. ... S....
2020 Supreme(Online)(KER) 13288 • India - High Court of Kerala
ALEXANDER THOMAS, J
GST - Liability - Section 122 of the State Goods and Services Act - The court clarified that according to the terms of the work ... in compliance with existing contracts and applicable tax laws. ... contract, liability to remit GST differs for various services, emphasizing the obligations of both service provider and recipient ... However, now ....
2024 Supreme(Online)(Bom) 11070 • India - High Court of Bombay
HON'BLE SHRI JUSTICE G. S. KULKARNIHON'BLE SHRI JUSTICE FIRDOSH PHIROZE POONIWALLA
a person who is registered or liable to be registered under section 22 or section 24; Section 122. ... 122(1A) of the CGST Act, 2017 and the like provisions of the State GST laws as applicable. ... 122(1A) of the CGST Act, 2017 and like provisions of the Maharashtra GST Act, 2017, Gujarat GST Act, 2017, Haryana GST Act, 2017, Tamilnadu GST Act, 2017, Andhra Pradesh GST Act, 2017,....
2024 0 Supreme(Cal) 560 • India - Calcutta
RAJA BASU CHOWDHURY
GST Act - Prohibition Order - Section 67(2), Section 67(7), Section 122 - The court discussed the provisions of Section 67(2) ... On the following date, in terms of first proviso to Section 67(2) of the GST Act, a prohibitory order was issued. Since then, on 26th December, 2023, a notice under Section 122 of the GST Act was issued. ... In response to such application, the office of the respondent no.1 by an e-mail communication dated 25th January, 2024 without appropr....
2025 Supreme(Online)(Kar) 99819 • India - IN THE HIGH COURT OF KARNATAKA AT BENGALURU
S.R.KRISHNA KUMAR
under Section 122 of the CGST Act are also barred by virtue of Section 74 of the CGST Act. ... The aforesaid explanation No.1 clearly indicates that once proceedings are initiated under Sections 73 or 74, penalty proceedings under Section 122 are deemed to have been concluded and on this ground also, the impugned Show Cause Notice which purports under Section 122 of the CGST Act is clearly illegal ... 122 of the GST Act in SCN No. 0....
2023 0 Supreme(All) 2830 • India - Allahabad
PANKAJ BHATIA
(A) Goods and Services Tax Act - Section 122 - Imposition of penalty for failure to pay collected GST - Petitioner challenged the ... for payment of penalty in terms of the mandate of Section 122 (1)(iii) of the GST Act (hereinafter referred to as 'the Act'). ... Present petition has been filed by the petitioner challenging the order dated 25.08.2021 whereby the order of penalty was passed imposing a penalty of Rs.28,00,476/- towards CGST and Rs.28,00,476/- towards SGST in purported exercise of powers ....
2023 0 Supreme(Bom) 514 • India - Bombay
G. S. KULKARNI, JITENDRA JAIN
Section 83 of the GST Act, 2017 is reproduced hereunder: 83. ... (1-A) of section 122, in such manner as may be prescribed. ... A cumulative reading of the provisions of Section 83(1) read with Section 122(1-A) of the Act makes it manifest that the Commissioner for the purposes of exercising power under Section 83 read with Section 122(1-A) of the CGST Act, would have a power to take action against “any person” as....
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