Goods Shall Be Released Provisionally If Assessee Demonstrates Inclusion Of Transaction In GSTR-1 Return: Madras High Court

The Bench of Justice Mohammed Shaffiq directed the assessee to submit a copy of the GSTR-1 report, as it would reveal whether the subject transaction was disclosed as a zero-rated sale.

Section 54 of the Central Goods and Services Tax Act, 2017 applies to persons who have paid a tax or any other amount, such as interest on tax, etc. and wish to claim a refund under the GST law. They can claim the refund in case of exports of goods or services or both, zero-rated supplies, deemed exports, and refund of unutilised input tax credit.

Section 16(3) of the Integrated Goods and Services Tax Act, 2017 provides that a registered person making zero-rated supplies can claim a refund of unutilized input tax credit on goods or services supplied without payment of integrated tax, under a bond or Letter of Undertaking, in accordance with Section 54 of the CGST Act and prescribed rules.

Section 129(3) of the Central Goods and Services Tax Act, 2017 provides that when goods or conveyances are detained or seized, the proper officer must issue a notice detailing the tax and penalty payable. Afterward, the officer must pass an order for payment under one of the specified clauses (a), (b), or (c).

Facts of the case:

The assessee/petitioner received an export order from M/s. Laxana PLC, Colombo, Sri Lanka, for Rs. 24,16,604/-. The goods were transported from Coimbatore to Tuticorin for export. During transit, the goods were intercepted and verified by authorities, resulting in a detention order due to the assessee's failure to generate an E-Invoice. A show-cause notice was issued under Section 129(3) of the CGST Act, proposing a 200% tax penalty.

The assessee argued that the non-generation of the E-Invoice was due to a technical error and that the E-Invoice was generated the following day, as the transaction was a Zero-Rated Sale meant for export. They contended that the delay was a procedural lapse, not an attempt at evasion, and therefore, the penalty was unjust.

The assessee has challenged the detention order on the grounds that the goods were intended for export and thus qualified as a Zero-Rated Sale, making any tax or penalty without jurisdiction.

Observations of the High Court:

Regarding the goods relate to export which is treated as zero rate under Section 16 of IGST Act, the bench opined that the assessee shall submit a report a copy of the GSTR-1 before the appropriate respondent, inasmuch as GSTR-1 would reveal if the subject transaction is disclosed as a zero-rate sale, an export transaction once disclosed in Form GSTR-1, integrated taxes ought to be paid or must be exported under Board or Letter of Undertaking in accordance with Section 54 of the CGST Act.

The bench concluded that if the assessee/petitioner is able to demonstrate that the transaction is included in the GSTR-1 Return, the goods shall be released provisionally.

In view of the above, the bench disposed of the petition, directing the assessee to file an appeal before the appropriate appellate authority under Section 107 of the Central Goods and Services Tax Act, 2017, to challenge the detention order.

Counsel for Petitioner/ Assessee: S. Rajasekar

Counsel for Respondent/ Department: R. Suresh Kumar

Case Title: M/s. Aqua Excel v. The State Tax Officer (Adjudication), Office of Commercial Tax Officer, Tirunelveli.

Citation: 2024 LiveLaw (Mad) 381

Case Number: W.P.(MD) No.22557 of 2024

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