Gst late fee

Hi all,

One of my friend who is running an hospital, registered under GST on July 2017. However after registration he comes to know that Hospital service are exempt from GST. Hence he is not filed the return. But last week he received a notice from department and met the officer, officer stating that he needs to file the nil return with fine till March. Later only he can cancel the registration. 

My query is if the services are taxable means, he need to file it as per the officer instruction, when service is not taxable why he need to pay penalty of it. Is any solution for this? 

Thanks in Advance.