General Penalty u/s 125 Cannot Be Imposed When Late Fee is Levied u/s 47: Madras HC [Read Order]

In a recent ruling, the Madras High Court held that when late fee is charged under Section 47 of the GST laws for delay in filing annual returns, the tax department cannot also impose a general penalty under Section 125 for the same delay, because the late fee itself is a form of penalty.

Kandan Hardware Mart, represented by its proprietor E. Palani filed several writ petitions challenging assessment orders passed by the State Tax authorities for the years 2017-18, 2018-19, and 2019-20. Through these orders, the department had demanded large amounts as late fee under Section 47 and, in many cases, had also imposed a general penalty under Section 125 of the GST Act.

The petitioner argued that charging both late fee and general penalty for the same delay in filing the annual return in Form GSTR-9 was unfair and not permitted under the GST law. It was also argued that the orders were passed without following principles of natural justice.

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In some cases, the annual returns were filed before the amnesty period mentioned in Notification No. 07/2023-Central Tax dated 31 March 2023. In other cases, the returns were filed during the amnesty period, which was later extended up to 31 August 2023. Even in such cases, the department still imposed penalties under Section 125 along with late fees.

The tax department argued that the amnesty notification applied only to those taxpayers who had not filed their returns and then filed them within the time period mentioned in the notification. According to the department, taxpayers who had already filed returns before the amnesty period were not entitled to any benefit, and penalties were correctly imposed.

The batch of writ petitions was heard and decided by Justice C. Saravanan of the Madras High Court. The Court observed that Section 47 clearly deals with late fee for delayed filing of returns and is itself penal in nature. The court observed that when the law already provides a specific penalty for a delay, the general penalty under Section 125 cannot be used for the same delay.

The court further observed that the amnesty notification issued under Section 128 was meant to give limited relief to taxpayers who filed their returns within the specified period. It was pointed out that this benefit cannot be extended to taxpayers who filed their returns before that period, as the notification does not say so.

The court held that wherever both late fee under Section 47 and general penalty under Section 125 were imposed for the same delay, the general penalty was not valid. At the same time, the Court allowed the late fee to stand, subject to the benefit of the amnesty notification in eligible cases.

The writ petitions were disposed of by a common order, and the tax authorities were directed to revise the demands in line with the legal position explained by the Court.

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