2024 (10) TMI 608 - HC - GST

Detention order challenged for zero-rated export goods requires GSTR-1 returns submission to prove export transaction disclosure

M/s. Aqua Excel Versus The State Tax Officer (Adjudication), Tirunelveli. The Deputy State Tax Officer, Tuticorin.

The HC challenged a detention order under Section 129(3) of the Central GST Act, 2017 for goods claimed to be zero-rated exports. The court held that the ... Detention order under Section 129 (3) of the Central Goods and Services Tax Act, 2017, dated 23.08.2024 - Challenge to order on the premise that the goods were meant for export and thus qualified for Zero Rate Sale and thus any levy of tax or penalty is without jurisdiction - HELD THAT:- In view of the peculiar facts of the case, viz., the goods relate to export which is treated as zero rate under Section 16 of IGST Act, this Court is of the view that the petitioner 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 Act. In view there of, if the petitioner is able to demonstrate that the transaction is included in the GSTR-1 Return, the goods shall be released provisionally. However, insofar as the impugned proceedings dated 23.08.2024, it is always open to the petitioner to question the impugned proceedings by way of an appeal before the appropriate appellate authority under Section 107 of the Central Goods and Services Tax Act, 2017, subject to complying with all other conditions including payment of pre-deposit if any such appeal is filed, the same shall be disposed within a period of four weeks, from the date of filing of the appeal. Petition disposed off. Issues:Challenge to detention order under Section 129 (3) of the Central Goods and Services Tax Act, 2017 on the grounds of goods meant for export and qualified for Zero Rate Sale.Analysis:The Writ Petition challenged the detention order under Section 129 (3) of the Central Goods and Services Tax Act, 2017, dated 23.08.2024, asserting that the goods were intended for export and therefore eligible for Zero Rate Sale, rendering any imposition of tax or penalty as lacking jurisdiction. The petitioner received orders for export from a company in Sri Lanka, moved the goods for export, and generated necessary documents like Export Invoice and E-Way Bill. The detention occurred due to the non-generation of E-Invoice at the time of interception, which was later rectified. The petitioner argued that any procedural lapses did not warrant a penalty of 200% under Section 129 (1) (a) of the Act, as the goods were for export and not for evasion purposes.The petitioner relied on Circular No. 10/2019Q1/17253/2019, emphasizing that penalties are not warranted for rectifiable documentation errors when valid documents accompany the goods. Additionally, reference was made to the Foreign Trade Policy, 2023, which prohibits withholding export consignments except for exceptional irregularities. The petitioner cited a judgment from the Allahabad High Court to support the contention that non-generation of E-Invoice was a technical error and did not indicate tax evasion, especially when all other necessary documents were in order.Contrarily, the respondents argued that the petitioner should have pursued a statutory appeal, citing a judgment from the Madras High Court in a similar case. The Court directed the petitioner to file a statutory appeal within a specified period and allowed for an application seeking provisional release of the detained goods. The Court considered the peculiar facts of the case, noting that as the goods were for export, the petitioner must demonstrate compliance with tax obligations through GSTR-1 Return. If the transaction is disclosed as a zero rate sale in the return, the goods would be released provisionally, and the petitioner could appeal the detention order under Section 107 of the Central Goods and Services Tax Act, 2017.In conclusion, the Writ Petition was disposed of, with the petitioner directed to submit a GSTR-1 report to demonstrate compliance with tax obligations for the export transaction. The Court allowed for provisional release of goods upon verification of the GSTR-1 disclosure, and the petitioner was given the option to appeal the detention order within a specified timeframe.