General GST Penalty Cannot Be Imposed When Late Fee Already Applies: Madras HC

Prajith Enterprises Vs State Tax Officer (Madras High Court)

The case was decided by the Madras High Court in a writ petition challenging an order issued under the Goods and Services Tax (GST) enactments. The writ petition was disposed of at the stage of admission itself with the consent of both parties.

The petitioner challenged an order dated 15 April 2025 issued in Form GST DRC-07 under Section 73 of the GST enactments for the tax period 2021–2022. The impugned order had been preceded by a show cause notice. Under this order, the respondent imposed late fee under Section 47(2) and a general penalty under Section 125 of the GST enactments. The order imposed late fees of ₹83,600 each under the Central GST and State GST laws and a penalty of ₹25,000 each under both enactments. The total demand raised under the order amounted to ₹2,17,200, consisting of ₹1,67,200 as late fee and ₹50,000 as general penalty.

The petitioner challenged the order primarily on the ground that another assessment order dated 13 May 2025 had also been issued for the same tax period. In that order, the petitioner had again been subjected to a penalty of ₹50,000. The petitioner had already filed an appeal on 11 August 2025 before the appellate authority against the assessment order dated 13 May 2025.

During the hearing, the petitioner’s counsel argued that the imposition of both general penalty and late fee together was not justified. The petitioner relied on an earlier judgment of the Madras High Court in Kandan Hardware Mart v. Assistant Commissioner (ST) (FAC) dated 2 January 2026. In that decision, the Court examined the relationship between late fee and general penalty under the GST enactments. The judgment observed that imposing penalties in a manner that singled out taxpayers could amount to hostile discrimination and would be contrary to Article 14 of the Constitution of India. It further noted that general penalty under Section 125 can be imposed only in the absence of any other specific penalty provided under the GST enactments.

The petitioner also referred to a decision of the Himachal Pradesh High Court in M/s. R.T. Pharma v. Union of India and Others, where the Court dealt with issues relating to delay in filing annual returns under GST. That decision held that it would be unjust to deny waiver of late fee to taxpayers who filed GST annual returns before the issuance of a specific amnesty notification.

In the present case, the respondent’s counsel acknowledged that the decision of the Madras High Court in Kandan Hardware Mart had not been appealed and therefore continued to govern the issue.

After considering the submissions and the facts on record, the Court noted that two assessment orders had been issued for the same tax period, dated 15 April 2025 and 13 May 2025. The Court therefore held that the general penalty of ₹50,000 imposed under Section 125 could not be sustained in the circumstances of the case.

Accordingly, the Court disposed of the writ petition by dropping the general penalty of ₹50,000 imposed under Section 125 of the GST enactments. However, the Court confirmed the liability of the petitioner to pay the late fee of ₹1,67,200 imposed under Section 47(2). The petitioner was directed to pay the confirmed late fee within 30 days from the date of receipt of the order.

The Court further directed that if the petitioner complied with the above stipulation by paying the late fee within the prescribed period, the impugned order dated 15 April 2025 would stand quashed and the related recovery proceedings would also be dropped.

The Court also issued directions regarding the appeal pending before the appellate authority against the assessment order dated 13 May 2025. Subject to the petitioner complying with the requirement of payment of the late fee, the appellate authority was directed to proceed with the appeal and pass a final order on merits in accordance with law as expeditiously as possible, preferably within three months of such payment. The Court further directed that the attachment of the petitioner’s bank account would automatically stand vacated upon compliance with the stipulated payment.

However, the Court clarified that if the petitioner failed to comply with the directions, particularly the payment of late fee within the specified period, the respondent authorities would be at liberty to proceed against the petitioner to recover the late fee in accordance with law, as if the writ petition had been dismissed.

With these directions and observations, the writ petition was disposed of. No costs were awarded, and the connected miscellaneous petitions were closed.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Mrs. K. Vasanthamala, learned Government Advocate takes notice for the Respondent.

2. This Writ Petition is being disposed of at the stage of admission itself with the consent of the learned counsel for the Petitioner and the learned Government Advocate for the Respondent.

3. The Petitioner is before this Court against the impugned order dated 15.04.2025 in Form GST DRC-07 passed under Section 73 of the respective GST Enactments for the tax period 2021-2022, which was preceded by a Show Cause Notice and thus suffered the impugned order. By the impugned order, Late Fee under Section 47(2) of the respective GST Enactments and also General Penalty under Section 125 of the respective GST Enactments has been imposed as detailed below :-

4. The petitioner has challenged the impugned order on the ground that another Assessment Order dated 13.05.2025 was passed for the same tax period, wherein also the petitioner has been subjected to a penalty of Rs.50,000/- for the same tax period.

5. Facts on record reveal that the petitioner has preferred an appeal on 11.08.2025 against the aforesaid Assessment Order dated 13.05.2025 before the Appellate Authority.

6. The learned counsel for petitioner submitted that both General Penalty and Late Fee go hand in glove. The learned counsel for petitioner further submitted that the issue has also now attained clarity in terms of decision rendered by this Court in  Kandan Hardware Martv. Asstt. Commissioner (ST) (FAC) (Madras)/W.P.No.27029 of 2023, dated 02.01.2026 wherein it has been observed as under:-

“203. To single them out would amount to hostile discrimination and contrary to Article 14 of the Constitution of India. To suspend “Late Fee” would also lead to mistrust in the tax administration and would be an anathema to Article 14 of the Constitution of India.

204. To single out would amount to arbitrary exercise of law failing the test of arbitrariness recognized under Article 14 of the Constitution of India.

2.5. The Division Bench of the Himachal Pradesh High Court in the case of M/s.R.T.Pharma v. Union of India and others, while dealing with a similar issue arising out of delay in filing of the “Annual Returns” in GSTR-9 under Section 39 of the respective GST Enactments held that it would be unjust to deny a “Late Fee”, waiver to a taxpayer who filed their Goods and Services Tax (GST) Annual Returns (GSTR-9 and GSTR-9C) before a specific Amnesty Notification was issued in Notification No.7/2023-Central Tax dated 31.03.2023, and was amended by Notification No.25/2023-Central Tax dated 17.07.2023.

206…….

207. Since these Petitioners are liable to pay “Late Fee”, the question of imposing “General Penalty” under Section 125 of the respective GST Enactments cannot be countenanced in view of the reasons that “General Penalty” under Section 125 of the respective GST Enactments can be imposed only in the absence of ‘any other penalty’ under the respective GST Enactments.”

7. The learned counsel for respondent also conceded that the aforesaid decision has not been appealed as of now and the order governs field.

8. Recording the above submission and taking note of the fact that two Assessment Orders have been passed on 13.05.2025 and 15.04.2025 for the same tax period, this Writ Petition is disposed of by dropping the General Penalty of Rs.50,000/- imposed on the petitioner under Section 125 of respective GST Enactments. The petitioner shall pay a Late Fee of Rs.1,67,200/- confirmed by the impugned order within a period of 30 days from the date of receipt of a copy of this order.

9. In case the Petitioner complies with the above stipulations, the impugned order dated 15.04.2025 passed by the Respondent shall stand quashed and also recovery proceedings shall also be dropped.

10. Subject to the Petitioner complying with the above stipulations, the Appellate Authority shall proceed to pass a final order on merits in the appeal pending against order dated 13.05.2025 and in accordance with law as expeditiously as possible, preferably, within a period of three (3) months of such deposit and the attachment of the bank account of the Petitioner shall also stand automatically vacated.

11. In case the Petitioner fails to comply with any of the stipulations, the Respondent is at liberty to proceed against the Petitioner to recover the late fee in accordance with law as if this Writ Petition was dismissed in limine today.

12. This Writ Petition stands disposed of with the above observations. No costs. Connected Writ Miscellaneous Petitions are closed.