Issue: Whether (a) the benefit of the amnesty scheme under Notification No. 7/2023–CT (as amended) could be extended to registered persons who filed GSTR-9 outside the notified period, particularly those who had filed returns prior to 01.04.2023; and (b) whether the authorities were justified in imposing a general penalty under Section 125 in addition to late fee under Section 47 for the same default of delayed filing of annual returns.

Held that: 

The Court examined the legality of levying general penalty under Section 125 of the respective GST enactments in cases where late fee under Section 47 had already been levied for belated filing of Annual Returns (GSTR-9), particularly in respect of petitioners who had filed such returns after the due date prescribed under Rule 80 but before the cut-off date stipulated in Notification No. 7/2023–Central Tax dated 31.03.2023, as amended by Notification No. 25/2023–Central Tax dated 17.07.2023.

The Court took note of the consistent judicial view of the Himachal Pradesh High Court and the Kerala High Court, which held that there was no justification in demanding late fee from assessees who had filed their annual returns before the cut-off date prescribed under the amnesty notifications. In Anishia Chandrakanth v. Superintendent, Central Tax [Kerala High Court], while it was held that such assessees were not entitled to refund of excess late fee already paid, the principle that no further penal consequences could be fastened was affirmed. Similarly, in R.T. Pharma v. Union of India (Himachal Pradesh High Court) , it was held that the intention of the Government behind the amnesty notification was not to harass taxpayers who voluntarily came forward to file their pending returns before the cut-off date, even if such filing was belated.

The Court undertook a detailed analysis of the nature of “late fee”, holding that although described as a “fee”, late fee under Section 47 is penal in character. It does not involve any quid pro quo, is imposed solely for breach of a statutory obligation, operates as a deterrent, and has civil consequences akin to a penalty. Merely because mens rea is not a prerequisite, it does not cease to be penal in nature. Consequently, once a late fee is levied, the imposition of a general penalty under Section 125, which applies only in the absence of any specific penalty provided under the Act, is legally impermissible.

The Court further clarified the statutory distinction between exemption and waiver. While the power to grant exemption from tax flows from Section 11, the power to waive penalty or late fee arises under Section 128. Waiver notifications issued under Section 128 are intended to address mitigating circumstances and cannot be equated with exemption notifications issued in public interest under Section 11. Applying Section 21 of the General Clauses Act, 1897, the Court reiterated that the power to issue such waiver notifications includes the power to amend, vary or rescind them.

Applying these principles, the Court held that the benefit of Notification No. 7/2023–CT dated 31.03.2023, as amended by Notification No. 25/2023–CT dated 17.07.2023, must be extended to all petitioners who had filed their annual returns before 01.04.2023, even though belatedly. Denial of such benefit would be arbitrary and violative of Article 14 of the Constitution. Consequently, such petitioners could not be subjected to late fee exceeding ₹10,000 each under CGST and SGST, nor could they be saddled with general penalty under Section 125.

The Court held that once late fee under Section 47 is levied (even at the concessional rate under the amnesty notifications), no general penalty under Section 125 can be imposed. The petitioners were held liable only to the capped late fee of ₹10,000 under each enactment, with complete waiver of general penalty. The petitions were accordingly allowed.

Case Name: Ms. Kandan Hardware Mart, Represented by its Proprietor E. Palani, M/s. Sharmila Plastics, Represented by its Proprietor Durai Raman, M/s. Agni Enterprises, Represented by its Proprietor S. Babu And Others The Assistant Commissioner (ST) (FAC), Chennai, State Tax Officer, Deputy Commissioner (ST) (FAC), Krishnagiri., HDFC Bank, Tamil Nadu And Others dated 02.01.2026

To read the complete judgement 2026 Taxo.online 17