Madras High Court on interplay between Section 47 late fee and Section 125 general penalty under GST

The Madras High Court, in Tvl R P G Traders Vs State Tax Officer, examined the legality of simultaneous levy of late fee under Section 47 of the Tamil Nadu GST Act, 2017 and a general penalty under Section 125 for non-filing of annual returns, along with consequential freezing of the assessee’s bank account. The Court also clarified the correct methodology for computing the maximum late fee under Section 47(2) and apportioning it between CGST and SGST.

The writ petition assailed an assessment order for the year 2020–21, by which the State Tax Officer imposed late fee towards delayed filing of the annual return and additionally levied a general penalty. Based on this order, the assessee’s bank account in State Bank of India was frozen, prompting the challenge before the High Court.

Background of the dispute

Facts leading to the writ petition

1. The assessee did not file the annual return for the relevant assessment year.
2. Invoking Section 47 of the Tamil Nadu GST Act, 2017, the assessing authority imposed:
   • Late fee of ₹75,025 under CGST, and
   • Late fee of ₹75,025 under SGST,
     aggregating to ₹1,50,050.
3. Over and above the late fee, the authority also invoked Section 125 and levied:
   • General penalty of ₹25,000 under CGST, and
   • General penalty of ₹25,000 under SGST,
     totalling ₹50,000.
4. Consequent to the impugned order, the assessee’s bank account maintained with State Bank of India was frozen, causing operational hardship.
5. The assessee approached the Madras High Court contending that:
   • Only late fee under Section 47 can be levied for delay in filing the annual return.
   • The residuary penalty provision in Section 125 cannot be applied where a specific provision (Section 47) already governs the default.
   • The authority acted without following the procedure contemplated under Section 73 of the GST law, including proper enquiry and verification of records.
   • The computation of the late fee amount was erroneous and contrary to Section 47(2).

Arguments advanced

Submissions on behalf of the assessee

Counsel for the assessee argued, in substance, as follows:

• Exclusive operation of Section 47 for late filing of annual return
  For failure to furnish annual returns under Section 44, the Act itself prescribes late fee under Section 47. Once this specific mechanism is invoked, the authority cannot additionally impose a general penalty under Section 125 for the very same lapse.

• Nature of Section 125 as a residuary provision
  Section 125 applies only where the Act does not provide any other specific penalty for a particular contravention. When late fee for non-filing/delayed filing of returns is specifically dealt with under Section 47, there is no scope to superimpose a general penalty for the identical default.

• Violation of procedure under Section 73
  It was contended that the impugned order was passed without proper enquiry, without due verification of records, and without adhering to the safeguards embedded in Section 73 of the GST enactment, thereby offending principles of natural justice.

• Reliance on earlier Madras High Court decision
  The assessee placed reliance on an earlier order of the Principal Bench of the same Court passed in W.P.No.36614 of 2024 dated 04.02.2025, where similar issues relating to penalty and late fee were considered.