2026 (2) TMI 278 - HC - GST

Late fee and general penalty in GST: court drops penalty for double punishment risk, retains conditional late fee recovery.

A high court found imposition of a general penalty alongside a confirmed late fee constituted impermissible double punishment and unequal treatment, and ... Late fee - General Penalty - Imposition of general penalty only in absence of any other penalty - arbitrariness and equal treatment - Doctrine against double punishment - HELD THAT:- 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. 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. 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. Writ Petition stands disposed of. Issues: Whether a General Penalty under Section 125 of the respective GST enactments can be imposed when a Late Fee under Section 47(2) has been imposed for the same tax period; and whether the General Penalty imposed on the petitioner should be dropped while confirming the Late Fee.Analysis: The petition challenges an assessment order imposing both Late Fee under Section 47(2) and a General Penalty under Section 125 for the same tax period, and another assessment for the same period is the subject of an appeal. The Court noted authoritative precedent holding that where a taxpayer is liable to pay a Late Fee, imposition of a General Penalty under Section 125 cannot be sustained because Section 125 applies only in the absence of any other penalty; treating the two as co-existent would amount to arbitrary and discriminatory treatment contrary to Article 14. The respondent conceded that the cited decision has not been appealed and governs the field. Taking into account that two assessment orders exist for the same period, the Court applied the principle that General Penalty cannot be levied in presence of the Late Fee and considered appropriate equitable disposal by conditioning relief on payment of the Late Fee.Conclusion: The General Penalty of Rs.50,000 imposed under Section 125 is dropped and the Late Fee of Rs.1,67,200 under Section 47(2) is confirmed; the impugned order dated 15.04.2025 shall stand quashed subject to deposit of the Late Fee within 30 days and other procedural directions in the order. (Decision in favour of the assessee on the issue of penalty.)