Recovery of Late Fees for GSTR-9 Defaults –A Critical Examination of the Statutory Machinery under the CGST Act, 2017
I. Statutory Liability — Section 47
Section 47(1) of the CGST Act directs that a registered person who fails to furnish GSTR-1 or GSTR-3B “shall pay a late fee” — a mandatory, self-executing obligation. Section 47(2), governing GSTR-9, uses the materially different phrase “shall be liable to pay a late fee” — an expression that imports contingency, adjudicability, and susceptibility to waiver. This linguistic distinction is not cosmetic; it is jurisprudentially significant.
The Government has, on repeated occasions, waived or reduced GSTR-9 late fees by notification — itself confirming that Section 47(2) creates a contingent liability, not an automatically crystallised demand. A liability that can be extinguished by executive notification cannot be treated as an unconditional obligation ready for summary recovery.
II. Sections 73 & 74 — No Jurisdiction
Section 73 governs demands for tax not paid; short paid, erroneous refunds, or wrongly availed ITC. Section 74 extends the same to fraud-tainted cases. Late fees are none of these. They are not tax; they arise from procedural default, not substantive liability. Any SCN purporting to invoke Sections 73 or 74 for recovery of late fees is, on its face, beyond the scope of those provisions and is vulnerable to a threshold jurisdictional challenge.
III. Section 75(12) — Excludes Late Fees
Section 75(12) permits recovery of self-assessed tax and interest without a fresh SCN. Late fees are conspicuously absent. This is a deliberate omission, not an oversight — confirming that late fees occupy a distinct legal category, outside the self-assessment recovery track.
IV. Section 79 — Recovery Requires Prior Determination
Section 79 empowers recovery of “any amount payable by a person”. However, Section 79 is a recovery tool, not an adjudication tool. It presupposes that the amount has been quantified through a prior process — either self-assessment or an adjudication order. To invoke Section 79 directly, without first determining the late fee through a legally prescribed mechanism, violates the foundational principle: no recovery without prior determination.
V. Judicial Authority: Madras HC — V.N. Mehta & Co.
The Hon’ble Madras High Court has authoritatively settled this question in V.N. Mehta and Co. v. Assistant Commissioner of GST & Central Excise [W.P. No. 26187 of 2019, dated 08.11.2019]. The Court held (Para 7):
“Except issuing the proceedings under Section 79, no other proceedings were ever issued against the petitioner determining their tax etc., liability… the term ‘amount payable by a person’ is to mean that such liability arises only after determination of such amount in a manner known to law.”
The writ petition was allowed and the impugned recovery proceedings set aside (Para 14):
“Thus, I find that the impugned proceedings are not maintainable. Accordingly the writ petition is allowed and the impugned proceeding is set aside.”
The ratio is directly applicable. Section 46 intimation is a notice, not an order. It cannot constitute a determination of liability under Section 78. Any Section 79 threat embedded in it is, accordingly, not maintainable in law.
VI. Section 46 — Notice Misused as Demand
Section 46 r/w Rule 68 authorises the proper officer to issue GSTR-3A directing the taxpayer to file the pending return within 15 days. That is its entire statutory purpose. It confers no authority to embed a calculated demand or threaten Section 79 recovery. Where an enforcement unit — rather than the taxpayer’s jurisdictional range officer — issues such intimation, a further jurisdictional overreach arises, since enforcement units are chartered for anti-evasion, not routine compliance follow-up.
VII. Portal Architecture & the Missing Machinery
The GST portal was designed to auto-collect late fees at the point of filing. Where the portal — by system limitation, waiver, or oversight — permits filing without collection, the CGST Act provides no express post-facto adjudication mechanism to retrospectively determine and recover that fee. A liability without machinery may be unenforceable — a proposition well-recognised in Indian fiscal jurisprudence.
VIII. Natural Justice — Non-Derogable Minimum
Before any late fee demand is crystallised, the taxpayer is entitled to: (a) a Show Cause Notice specifying the default; (b) a reasonable opportunity to demonstrate applicability of waiver notifications; and (c) a speaking order. GSTR-3A intimation with a 15-day ultimatum backed by a Section 79 threat bypasses all three steps — it is a pre-adjudication compulsion antithetical to Article 14 of the Constitution.
IX. Practical Guidance
Step 1: Verify jurisdiction — is the issuing officer the proper officer of your range, or an enforcement wing?
Step 2: Check applicable waiver notifications — if a notification waives the fee for the relevant year, the liability is extinguished.
Step 3: File a reply rising: inapplicability of Section 73/74, absence of adjudication, impropriety of Section 79 threat, and the ratio of V.N. Mehta and Co.
Step 4: If recovery is nevertheless attempted, file a writ petition under Article 226 before the High Court seeking prohibition of recovery proceedings.
X. Conclusion
Obligation is not enforcement; liability is not recovery. Between Section 47(2) and Section 79 lies a constitutional and statutory requirement of lawful determination — a process the CGST Act does not expressly supply for late fees escaped at the portal. Treating Section 46 intimation as a determination order compresses three distinct legal steps into one irregular act. The Madras High Court has said so plainly. Practitioners must resist administrative pressure that substitutes form for substance.
Statutory & Judicial References
Sections 44, 46, 47, 73, 74, 75(12), 78, 79 — Central Goods and Services Tax Act, 2017
Rule 68 — CGST Rules, 2017 | Finance Acts: 2021, 2022, 2023 | CGST Amendment Act, 2018
V.N. Mehta and Co. v. ACGST & CE, W.P. No. 26187 of 2019, Madras HC, dt. 08.11.2019
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Author: Adv. Rabinarayan | R N LEGAL – GST Advocates & Tax Law Practitioners
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