The most common and most likely answer to this crossword clue is the 7 letter word GEHENNA
I've seen this crossword clue in The Times
G
E
H
E
N
N
A
More clues leading to the result GEHENNA
- Information not available about what constitutes place of punishment
- An awful place for Germans to go, North America
- Copenhagen without law enforcer turns into destination for the wicked
- Boleyn and husband, say, set up in hellish situation
- Returned, say, to die, say, in Hell
- After starting to gel, Anne rejects the guy - goes through hell
- Good woman with man back in Eden? Hardly
Buddy explains!

The straight part
We know that "place of punishment" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case place of punishment = gehenna.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.