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

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 petitioner must submit GSTR-1 returns to demonstrate the transaction was disclosed as a zero-rate export sale. If proven, goods would be released provisionally. The court noted that integrated taxes must be paid or goods exported under Board/Letter of Undertaking per Section 54. The petitioner retained rights to appeal under Section 107, with any appeal to be disposed within four weeks. Petition disposed.

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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.

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