You are correct to point out the apparent oversight. The issue here isn't a direct violation of 240.21(B)(3) as you've correctly paraphrased it. The problem lies in the fact that the primary tap conductors, while meeting the requirements of 240.21(B)(3), are not adequately protected from overload considering the size of the transformer. The secondary breaker is sized correctly for the secondary conductors and load, but doesn't provide adequate overload protection for the primary conductors given the transformer size and upstream breaker.Here's how this would be a violation: Violation of 240.4(F) Protection of Transformer Primary Conductors

This section deals with the protection of transformer primary conductors. While 240.21(B)(3) allows for a tap rule exception, it doesn't eliminate the fundamental requirement of protecting the conductors. 240.4(F)(1) typically allows you to use the next higher standard overcurrent device (above the conductor ampacity) if the conductor ampacity doesn't align with a standard breaker size. However, this is predicated on the fact that you've already met the transformer's primary overcurrent protection requirements. In your example, the 50A primary conductors are protected by a 125A breaker. 240.4(F) requires that the transformer primary be protected according to 450.3.

Violation of 450.3(B) Transformer Overcurrent Protection

This section details the requirements for protecting the transformer itself. Since the transformer is > 600V nominal, the requirements of 450.3(B) apply. Depending on the primary current (25 kVA / 240V = 104.16A) and whether your installation has qualified supervision and design, the transformer must be protected at either 125% or 250% of the rated primary current.

Why is this a problem?

Think about what happens if the transformer is overloaded beyond its 25 kVA rating for an extended period. The secondary breaker will not trip, because it's only protecting the secondary side from loads exceeding 100A on the secondary. If the secondary load exceeded 12 kVA but was below 25 kVA, the 100A breaker would not trip. The primary current would rise proportionally. The primary conductors, rated for only 50A, could overheat and become a fire hazard. The 125A breaker would not trip, as it would not see overload.

Correct Solution

To be compliant, you would need to address the overload protection for the primary side. Some options:1. Reduce Primary OCPD Size

If code allows, change the primary OCPD to a size that is closer to the primary conductor's ampacity and also meets the requirements of 450.3 for transformer protection. This might require a smaller OCPD size, perhaps 60A or 70A, depending on standard OCPD sizes and what's allowed by the code for transformer protection.
2.

Increase Primary Conductor Size

Increase the primary conductor size to match or exceed the calculated primary current of the transformer, and also meet the requirements of 450.3 for transformer protection. This would allow you to keep the 125A primary OCPD if the conductors were large enough to handle it.
3.

Use Properly Sized Fuses: Fuses generally allow higher short-circuit and ground fault protection than circuit breakers, and can be sized for overload protection.In summary, while 240.21(B)(3) allows the tap, it doesn't* remove the requirement to protect the transformer itself from overload according to 450.3, and those requirements dictate primary overcurrent protection, which is in turn impacted by 240.4(F). Your scenario fails because the primary tap conductors are not properly protected by the existing OCPD when considering the transformer size and loading. Flag for review