General disciplines related to penalty :
General principles of imposing penalty are given in section 126 of CGST Act. The provisions of this section will not apply in such cases where the penalty prescribed under the Act is either a fixed sum or expressed as a fixed percentage- section 126(6) of CGST Act
The principles are sound but unfortunately followed very rarely.
No penalty for minor breaches – No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.
For the purpose of this sub-section -(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than rupees five thousand (b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on record- section 126(1) of CGST Act.
Penalty to be commensurate with severity of breach – The penalty imposed shall depend on the facts and circumstances of the case and shall be commensurate with the degree and severity of the breach- section 126(2) of CGST Act.
No penalty without hearing – No penalty shall be imposed on any person without giving a notice to show cause and without giving him an opportunity of being heard- section 126(3) of CGST Act.
Nature of breach and applicable law should be specified while imposing penalty – The officer under this Act shall while imposing penalty in an order for a breach of any law, regulation or procedural requirement, specify the nature of the breach and the applicable law, regulation or procedure under which the amount of penalty for the breach has been specified- section 126(4) of CGST Act
Lower penalty if breach voluntarily disclosed – When a person voluntarily discloses to an officer under this Act the circumstances of a breach of the tax law, regulation or procedural requirement prior to the discovery of the breach by the officer under this Act, the proper officer may consider this fact as a mitigating factor when quantifying a penalty for that person- section 126(5) of CGST Act
No penalty once penalty in section 73 or 74 is paid – Non-payment or short payment of taxes or improper availment or utilization of input tax credit or erroneous refunds are major offences. These are covered under sections 73 and 74 of CGST Act. Once penalty under provisions of section 73 or 74 are paid, all proceedings are concluded and penalty cannot be imposed under any other provision of GST Law [of course, prosecution can be launched].