This ruling of Madras High Court provides clarity on GST compliance and refund eligibility for businesses dealing with goods detention under Section 129.
The Madras High Court, in the case of Chetna Steel Tubes Private Limited v. Goods and Service Tax Network (W.P.Nos.19976 & 19977 of 2021 & W.M.P.Nos.21231 & 21233 of 2021), reaffirmed taxpayers’ rights to claim refunds for excess GST paid during goods detention. The court dismissed petitions challenging a 2018 circular related to tax obligations under Section 129 of the CGST Act.
Background of the Case
M/s Chetna Steel Tubes (P.) Ltd. (“the Petitioner”) filed a writ petition contesting Circular No. 41/15/2018 GST, issued on April 13, 2018 (“the Impugned Circular”). The petitioner argued that paying tax both at the detention stage and in regular GST returns (Form GSTR-3B) led to double taxation. Additionally, the petitioner challenged demand notices issued on April 28, 2021, and April 29, 2021 (“the Impugned Notices”).
Key Legal Issue
The primary legal question was whether tax collected at the stage of detention could be claimed as a refund if excess tax was later paid in regular returns.
Madras High Court’s Observations and Verdict
In its ruling, the Hon’ble Madras High Court made the following key observations:
- Legal Framework Before and After January 1, 2022: The court noted that before January 1, 2022, businesses were required to pay both tax and penalties when goods were detained under Section 129 of the CGST Act. However, after the amendment, only a 200% penalty on the tax amount is imposed.
- No Scope for Double Taxation: The court rejected the petitioner’s claim that the circular imposed double taxation, clarifying that Section 129’s primary objective is to ensure tax compliance for goods in transit that do not meet the necessary legal requirements.
- Refund Eligibility for Excess Tax Paid: The court held that if a supplier’s goods were detained and subjected to tax and penalties under Section 129 (before the 2022 amendment), any excess tax paid in GSTR-3B returns could be claimed as a refund.
- Dismissal of Petitions: The court ruled that the petitioner’s concerns were misplaced and unwarranted, leading to the dismissal of the writ petitions.
Also Read: GST Refund Must be Examine on Documents Related to ITC Availing & Zero-Rated Products Exporting
Implications of the Judgment
This ruling provides clarity on GST compliance and refund eligibility for businesses dealing with goods detention under Section 129. It reassures taxpayers that excess GST paid due to detention can be claimed back through refunds, ensuring they are not burdened with double taxation.
Conclusion
The Madras High Court’s judgment strengthens taxpayers’ rights while upholding tax compliance measures under the CGST Act. Businesses affected by goods detention can now confidently seek refunds for any excess tax paid, aligning with fair tax principles and legal provisions.
For businesses facing similar issues, this judgment provides a crucial precedent, reinforcing that the excess tax paid in GSTR-3B is refundable and does not constitute an additional tax burden.
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