Additional Penalty u/s 125 Not applicable When Late Fees Levied for Non-Filing or Delayed Filing of GST Returns: Madras HC [Read Order]

The Madras High Court has  held that an additional penalty under section 125 of the Goods and Services Tax (GST) is  not applicable when late fees are levied for non-filing or delayed filing of GST returns.

Under Section 73 of the TNGST Act, 2017, the petitioner, Tvl. Jainsons Castors & Industrial Products, contested an order dated 24.07.2004 issued in Form GST DRC-07, claiming it was unlawful and in violation of natural justice principles.

The petitioner argued that although it had postponed filing its annual return in accordance with Section 44, the show cause notice and demand issued under Section 73 were not preceded by a legitimate notification under Section 46. The petitioner objected to the imposition of a penalty under Section 125 of the Act but did not contest the late fee under Section 47.

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The court was asked to decide whether it was lawful to impose a penalty under Section 125 in addition to a late fee under Section 47. The question was whether it was against natural justice principles to start proceedings under Section 73 without first sending a notice under Section 46.

The petitioner contended that the general penalty of Section 125 cannot be applied concurrently with Section 47, which expressly provides for late fees in the event of a delay in filing returns. further contended that before starting proceedings under Section 73, no notice under Section 46 had been given.

According to the respondent, the petitioner's failure to file yearly returns under Section 44 justified the start of proceedings under Section 47 r/w Section 73. The failure to supply turnover details resulted in the imposition of both the penalty and the late fee.

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The Court determined that Section 47(2) solely regulates late fees for failure to file or late filing of returns, and it permits a fine of Rs. 100 per day, up to a maximum of 25% of his State revenue. It is evident from reading Section 47(2) of the Act above that any registered person who does not submit the return required by Section 44 by the deadline will be subject to a late fee of one hundred rupees for each day that the failure persists, up to a maximum of a quarter of his State turnover.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

According to Section 47 of the Act, a separate provision that addresses any default or late filing of returns, the respondent may demand that the petitioner pay a late fee if the return is not filed. The respondent's show cause notice under Section 47 r/w 73 of the Act is deemed flawless by the Court. The respondent has the right to start legal action in accordance with the applicable provision for failing to file a return. Both a penalty under Section 125 of the Act and a late fee under Section 47 of the Act have been imposed by the respondent.

According to a single bench of Justice Krishnan Ramasamy, a general penalty would be applied if this act did not specify a specific penalty. According to Section 47 of the Act, a penalty in the form of a late charge was applied in this instance. As a result, the Rs. 50,000 general penalty for CGST and SGST is incorrect and is being revoked.

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The bench noted that section 125 is a residuary penalty clause that only applies in the absence of any other specified penalty. The general penalty under Section 125 was not applicable because a specific penalty (late fee) under Section 47 had already been applied. The court invalidated the penalty imposed under Section 125 but upheld the imposition of a late charge under Section 47.

To Read the full text of the Order CLICK HERE

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