I actually don't know if you can get punished for simply swearing, but I was always under the impression that swearing wasn't the issue, it was the context of your message. If your chat message is "Motherfucker, you did a goddamn good job" and get reported, I don't see how you can get punished for that.
The issue comes when you're flaming, plainly using hate words without context like faggot or nigger are more than just swear words, and otherwise swearing while flaming "You fucking idiot" isn't punished because you swore but because you're being unsportsmanlike.
If the above is true, then there are still people who, regardless of whether they feel they should report you or realize you're not doing anything worth reporting, don't like to be exposed to swearing. Or maybe you're a kid who's parent allows you to play League on the stipulation that you leave the filter on. It has many uses for omitting swearing in allowed context where that is wanted and is a good service to have in order to appeal to a more diverse player base.