The Hon’ble Madras High Court in the case of Kandan Hardware Mart v. The Assistant Commissioner [W.P. Nos. 27029, 27032, 27036, 32599, 19967, 34352, 34357, 35186 of 2025, order dated January 2, 2026] held that once late fee under Section 47 of the Act has been levied for belated filing of annual returns, imposition of general penalty under Section 125 is not permissible since late fee itself is penal in nature; the Court also directed extension of the benefit of Notification No. 7/2023-Central Tax (as amended by Notification No. 25/2023-Central Tax) to eligible assessees and set aside levy of general penalty.
Facts:
M/s Kandan Hardware Mart (“the Petitioner”) and other assessees had filed annual returns (GSTR-9) belatedly for Financial Years 2017-18 to 2021-22, and were subjected to late fee under Section 47(2) and in several cases general penalty under Section 125 by the department.
The Assistant Commissioner (ST) (FAC) (“the Respondent”) passed orders imposing late fee and, in certain cases, additional general penalty, and refused to extend the benefit of Notification No. 07/2023-Central Tax dated March 31, 2023 as amended by Notification No. 25/2023-Central Tax dated July 17, 2023 in the manner sought by the Petitioners.
The Petitioner contended that once late fee was levied under Section 47, the general penalty under Section 125 could not be imposed, as late fee itself partakes the character of penalty, and further sought re-working of late fee in light of the above notifications and waiver provisions.
The Respondent contended that late fee and general penalty could be imposed, and that the benefit of the notifications was limited to the class of taxpayers specified therein.
Aggrieved by the levy of late fee and general penalty and denial of notification benefit, the Petitioner approached the High Court by way of writ petitions under Article 226 of the Constitution of India, seeking quashing of impugned orders and re-computation of late fee in accordance with the notifications.
Issue:
Whether general penalty under Section 125 of the GST enactments can be imposed in addition to late fee under Section 47 for belated filing of annual returns, and whether the benefit of Notification No. 7/2023-Central Tax dated March 31, 2023 (as amended) should be extended to similarly placed assesses?
Held:
The Hon’ble Madras High Court in W.P. Nos. 27029, 27032, 27036, 32599, 19967, 34352, 34357, 35186 of 2025 held as under:
- Observed that, the late fee levied under Section 47 possesses characteristics of a penal levy, as it is imposed only upon default, operates as a deterrent, lacks quid pro quo, increases with the period of default, and carries civil consequences similar to penalty.
- Noted that, general penalty under Section 125 applies only in the absence of any other penalty, and therefore cannot be imposed where late fee has already been levied.
- Noted that, taxpayers who filed annual returns before the cut-off date prescribed in Notification No. 7/2023-Central Tax dated March 31, 2023, as amended, could not be singled out and denied the benefit of concessional late fee, as such denial would amount to hostile discrimination under Article 14.
- Observed that, benefit of Notification No. 7/2023-Central Tax dated March 31, 2023 as amended by Notification No. 25/2023-Central Tax dated July 17, 2023 must be extended to similarly placed petitioners, and that such petitioners were not liable to pay late fee beyond Rs. 10,000 nor liable for general penalty.
- Held that, imposition of general penalty in addition to late fee was unsustainable, and the impugned orders were set aside to the extent indicated and appropriate relief granted to Petitioners.
Our Comments:
This Court in Tvl. Jainsons Castors and Industrial Products v. The Assistant Commissioner (ST), Nandanam, Chennai [W.P. No. 36614 of 2024, order dated February 4, 2025], where it was held that when late fee is imposed under Section 47, general penalty under Section 125 cannot be levied since the statute contemplates general penalty only where no specific penalty is provided. The present judgment adopts the same reasoning and extends it to a batch of cases.
Further in M/s R.T. Pharma v. Union of India [CWP No. 4899 of 2023 order dated December 21, 2024] the Hon’ble Himachal Pradesh High Court, held that denial of late-fee waiver to taxpayers who filed returns before issuance of an amnesty notification would be unjust, and relied upon that reasoning while extending notification benefits to similarly situated assessees.
Relevant Provisions:
Section 47 of the CGST/TNGST Act, 2017
“47. Levy of late fee. –
(1) Any registered person who fails to furnish the details of outward or supplies required under section 37 or returns required under section 39 or section 45 or section 52 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.
(2) Any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter per cent. of his turnover in the State or Union territory.”
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