Is it legal for an employer to withhold my salary as a penalty?

Wage payment law does permit certain limited, specific deductions from an employee's wages — but these are generally restricted to specific categories (like fines for defined misconduct, following a proper process, or deductions for damage/loss caused by the employee's own default) and are subject to caps on the amount that can be deducted.

Importantly, any fine imposed as a deduction generally needs to follow a proper process — including giving you an opportunity to explain yourself before the fine is imposed, and the fine cannot simply be imposed arbitrarily at the employer's discretion without any procedural fairness.

If you believe the deduction from your salary exceeded what's legally permitted, or wasn't handled through a proper, fair process, you can raise this with the labour authorities, who have the power to direct that wrongfully deducted wages be paid back to you. It would help to gather your payslips showing the deduction and any explanation your employer gave, before consulting a labour lawyer about challenging it.