GST Section 129 detention tax doesn't create double taxation as suppliers can claim refunds in GSTR-3B returns

The HC dismissed writ petitions challenging a circular dated 13.04.2018 regarding GST tax liability. Petitioner argued they faced double taxation - once during goods detention and again when filing regular GSTR-3B returns. The court held that Section 129 of GST Act aimed to recover tax on non-compliant goods in transit, with tax collected only to the extent payable in returns. If goods were detained and taxed under Section 129, suppliers could claim refund of excess tax paid in GSTR-3B returns. The court found petitioner's double taxation apprehension misplaced and unwarranted, dismissing the petitions.

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Issues:
Challenge to impugned circular dated 13.04.2018 under GST Act, petitioner's contention of double tax liability, validity of demand notice dated 28.04.2021 and 29.04.2021, interpretation of Section 129 of GST Act pre and post 01.01.2022.

Analysis:
The petitioner contested the circular dated 13.04.2018 under GST Act, specifically objecting to Para 2(h) which outlined the procedure for releasing goods upon payment of tax and penalty under Section 129. The petitioner argued against being subjected to double tax liability, raising concerns about the demand notices issued in April 2021. The court examined Section 129 of the GST Act, both pre and post 01.01.2022, highlighting the changes in the provisions related to detention, seizure, and release of goods and conveyances during transit.

The court noted that prior to 01.01.2022, tax and penalty were applicable upon detention of goods under Section 129, with the tax payable at the stage of detention. However, post the amendment, only a penalty at 200% of the tax payable on the goods is imposed. The purpose of Section 129 was clarified as the recovery of tax on goods in transit that did not meet statutory compliance for removal.

Addressing the petitioner's concern of double tax imposition, the court explained that tax collected at the time of detention aligns with the tax payable in returns, debited from the electronic credit account under the GST Act. Furthermore, if a supplier's goods were detained and taxed under the previous provisions, they could claim a refund for any excess tax paid through GSTR-3B filings. The court concluded that the petitioner's apprehensions were unfounded and dismissed the writ petitions, emphasizing that the concerns raised were misplaced and unwarranted. The court ruled in favor of upholding the impugned circular and demand notices, closing the connected miscellaneous petitions without costs.

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