Late Fee vs General Penalty Under GST: Madras High Court Draws the Line

Can a taxpayer be saddled with both a late fee and a general penalty for the same default under GST? The Madras High Court recently addressed this very question in the case of Tvl. Jainsons Castors & Industrial Products v. The Assistant Commissioner (ST) [2025(02)LCX0332], delivering a clear and reasoned judgment that distinguishes the scope of Section 47 from Section 125 of the CGST/TNGST Act.

Let’s unpack the judgment, the statutory framework, the parties' arguments, and the Court’s rationale.

Understanding the Statutory Provisions

Section 47 – Late Fee for Filing Returns Late

Section 47 is a specific rule that deals with what happens if you file your GST returns after the due date. It doesn’t call this a "penalty" - it calls it a late fee, which is automatic and based on how many days you're late. There are two parts:

➲ Key takeaway: Section 47 is a precise and automatic late fee rule - if you file late, you pay, based on the number of delayed days.

Section 125 – General Penalty

Section 125 is like a "catch-all" penalty rule. It says that if you break any GST rule and there's no specific penalty provided elsewhere in the Act, then the officer can impose a general penalty - up to Rs.25,000 under CGST and Rs.25,000 under SGST.

➲ Key takeaway: Section 125 is only meant to be used when no other section already deals with the situation. It shouldn’t be used if a specific section like 47 already covers the issue.

The Case at a Glance

The petitioner, Tvl. Jainsons Castors & Industrial Products, had filed the annual return belatedly. The tax department initiated proceedings and issued a demand in FORM GST DRC-07 invoking Section 47 r/w Section 73, and imposed:

The petitioner did not challenge the late fee but objected to the general penalty being imposed in addition.

Petitioner's Arguments

1) Only Late Fee Permissible

The learned counsel for the petitioner argued that Section 47 specifically deals with delay in filing returns, and thus, only late fee can be levied. Invoking Section 125 in such a case was impermissible, as a specific penalty provision existed.

2) Wrong procedure used

The department didn’t follow proper process. No notice was issued under Section 46 which requires the officer to give time to file a return before starting penalty proceedings

3) Section 73 doesn’t apply

Section 73 is meant for tax shortfall or non-payment, not late filing. Using it for late return cases is incorrect.

4) Challenge Limited to General Penalty, Not Late Fee

The petitioner made it clear that they were not contesting the late fee, but only the additional penalty imposed under Section 125, which lacked legal basis and violated the principle of natural justice.

Department’s Arguments

1) Delay is undisputed

The taxpayer delayed filing their annual return - so late fee under Section 47 is justified.

2) Penalty added due to incomplete data

The taxpayer didn’t furnish turnover details, so the department used Section 73 to compute dues and imposed a general penalty under Section 125.

3) No error in their process

The department believed issuing a notice under Section 47 read with Section 73 was proper and justified.

What the High Court Held

Justice Krishnan Ramasamy upheld the petitioner’s key argument and gave clarity on how the two provisions work.

☑ Late Fee under Section 47 is Valid

The Court confirmed that delayed return filing falls squarely under Section 47(2). The officer is fully justified in levying the late fee in that case.

"7.In the event of non-filing of the return, the respondent can call upon the petitioner to pay the late fee in terms of Section 47 of the Act, which is independent provision deals with any default or belated filing of return. Therefore, this Court does not find any fault in the show cause notice issued by respondent under Section 47 r/w 73 of the Act. The respondent is entitle to initiate proceedings as per applicable provision for non-filing of return….."

☒ General Penalty under Section 125 Not Applicable

But the Court made it clear: you cannot use Section 125 where a specific rule like Section 47 already applies. Imposing a general penalty on top of the late fee was wrong and unjustified.

"A reading of the above would show that in the event no penalty is separately provided in this act, general penalty would apply. In the present case, penalty was imposed in the form of late fee in terms of Section 47 of the Act. Therefore, general penalty of Rs.50,000/- towards CGST and SGST is not correct and the same is set aside. As far as late fee is concerned, the same is confirmed."

Key Takeaways from the Ruling:

1. Section 47(2) is self-contained provision for delayed filing of annual returns.

2. Section 125 is residual and applies only where no specific penalty is provided.

3. Dual penalty for the same default is impermissible under GST law.

4. Late fee imposed under Section 47 is upheld, but the general penalty under Section 125 is quashed.

Significance of the Judgment

This judgment reaffirms a basic legal principle-when a specific provision governs a particular contravention, a general provision cannot be superimposed upon it. Section 125 cannot be used as a backdoor to impose harsher or additional penalties when Section 47 already provides a structured penal mechanism.

Tax officers cannot impose duplicative financial burdens using general penalty provisions where the law already prescribes a precise consequence (like a late fee).

By requiring proper invocation of relevant provisions and rejecting overlapping penalties, the judgment safeguards procedural fairness.

What This Means for Taxpayers

This judgment gives clarity and protection against overreach:

If a specific section (like Section 47) already imposes a late fee, the department can’t add a general penalty on top using Section 125.

Late fees are fixed and calculable. Penalties require discretion, notices, and justification.

Officers must follow the correct sequence of notices and actions under the law. You can contest any penalty that doesn’t follow procedure or overlaps with a specific provision.

Conclusion

The Jainsons Castors judgment marks an important clarification in GST jurisprudence. It prevents the misuse of the general penalty provision under Section 125 by affirming that where a specific consequence like a late fee under Section 47 exists, no additional penalty can be superimposed. The decision reinforces proportionality in tax enforcement and stands as a textbook example of how precise statutory interpretation safeguards taxpayer rights. As GST law evolves, such judicial interventions are essential to uphold fairness, due process, and discipline in administration.

Above all, it serves as a reminder that specific provisions override general ones, and that duplication of penalties has no place in GST law.

For taxpayers, the message is simple: comply with timelines - but know your rights when faced with arbitrary demands.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.