Late Fee vs General Penalty: Has the Madras High Court Drawn a Line Between Delayed Filing and Non-Filing of Returns?
Varied views from the various high courts-
The interplay between Section 47 and Section 125 of the CGST Act has once again come under judicial scrutiny. In Tvl. KPK Fuel Services v. State Tax Officer (Madras High Court, 02.06.2026), the Court upheld both the levy of late fee under Section 47(2) and the imposition of general penalty under Section 125 for failure to file the annual return in Form GSTR-9. The ruling assumes significance because it appears to depart, at least factually, from the earlier line of decisions of the same Court which had held that once a specific consequence is prescribed under the Act, the residuary penalty provision under Section 125 cannot be simultaneously invoked.
Madras high court imposed both late fees and penalty-
The controversy arose from an order imposing late fee and penalty for failure to furnish the annual return for FY 2017-18. The taxpayer contended that late fee can be levied only in cases of belated filing and not where the return is never filed. It was also argued that once late fee had been imposed under Section 47, the invocation of Section 125 was impermissible because Section 125 operates only in cases where no separate penalty is provided under the statute.
The Court rejected both contentions.
Interpreting Section 47(2), the Court observed that the provision applies to any registered person who fails to furnish the annual return by the due date. The language of the provision, according to the Court, is broad enough to cover continuing non-filing and is not restricted only to situations where the return is eventually furnished after a delay. The Court therefore held that late fee can be levied even where the taxpayer has completely failed to file the annual return.
More importantly, while dealing with Section 125, the Court held that no separate penalty is prescribed under the GST enactments for failure to file the annual return. On that basis, it concluded that the general penalty provision contained in Section 125 could validly be invoked.
A comparison of various judgments denying the general penalty earlier and now the Madras high court judgment levying it-
At first glance, the ruling appears difficult to reconcile with earlier decisions such as Kandan Hardware Mart, Kalanther Madeena Textiles and SVR Developers, where the Madras High Court had held that once a specific consequence in the form of late fee under Section 47 is prescribed for delayed filing of annual returns, the residuary penalty under Section 125 cannot be imposed for the very same default. The underlying rationale in those cases was that Section 125 applies only where no separate penalty is provided under the Act. If the legislature has already prescribed a consequence for a particular contravention, resort to the residuary penalty provision would defeat the statutory scheme.
A closer reading, however, suggests that the present judgment may be proceeding on a different factual premise. The earlier cases involved situations where the annual return had ultimately been filed, albeit belatedly. The Court therefore treated the default as one of delayed compliance for which Section 47 itself provided a complete code. In contrast, the present case involved a situation where the annual return had not been filed at all. The Court appears to have viewed complete non-filing as a distinct contravention for which no separate penalty is specifically prescribed, thereby justifying recourse to Section 125.
Whether this distinction is legally sustainable remains open to debate.
One may legitimately question whether the distinction between delayed filing and non-filing can be drawn from the language of Section 47 itself. The provision imposes late fee on a registered person who “fails to furnish the return by the due date” and further provides that such fee accrues for every day during which the failure continues. The statutory language does not expressly differentiate between a return filed after the due date and a return never filed at all. In fact, continuing non-filing may arguably be nothing more than an extended form of the same default already contemplated by Section 47. If that interpretation is accepted, a strong argument exists that Section 47 constitutes the specific legislative consequence for both delayed filing and complete non-filing, leaving little room for the simultaneous application of Section 125.
Viewed from this perspective, the judgment raises a broader interpretational issue. Is complete non-filing merely a more serious manifestation of delayed filing, or does it constitute an independent contravention capable of attracting the residuary penalty provision? The answer to that question will determine whether the present ruling can comfortably coexist with the earlier Madras High Court decisions or whether a deeper conflict in judicial reasoning is beginning to emerge.
For the moment, the judgment may be understood as recognising a distinction between delayed filing and complete non-filing of annual returns. The Court has effectively held that while Section 47 governs the consequences of failure to furnish returns, Section 125 may still operate where the contravention consists of a complete failure to comply with the statutory obligation of filing the annual return.
The decision therefore adds an important dimension to the evolving jurisprudence on GST penalties. While the earlier line of authority curtailed the indiscriminate use of Section 125 where late fee had already been imposed, KPK Fuel Services suggests that the residuary penalty provision may still have a role to play in cases of total non-compliance. Whether this distinction ultimately withstands further judicial scrutiny is likely to remain an important issue for future litigation.
The real question is no longer whether Section 125 can accompany a late fee. The real question is whether complete non-filing of a return is fundamentally different from delayed filing, or merely the most extreme form of the same default.
Let us wait for the future to see how this issue will be finally settled by the courts. By the time taxpayer shall take care because deptt will try to levy both.
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