2023 (8) TMI 1036 - HC - GST

Levy of penalty - Detention of goods alongwith vehicle - e-way bill generated for return of goods without issuing credit note - issuance of Credit Notes u/s 34 of the respective GST enactments - HELD THAT - There is no dispute that the petitioner had dispatched the goods to the consignee/buyer by four different invoices all dated 25.12.2022 - The goods also accompanied e-way bills all dated 26.12.2022. The goods were not received by the consignee/buyer and therefore, they were re-transported back by the petitioner after generating four different e-way bills all 28.12.2022. Under Section 34(1) of the CGST Act, where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed - the goods which are being returned need not necessarily accompany a Credit Note. The Credit Note or Debit Note as the case may be are intended only for adjustment of tax liabilities on account of return of the goods and where tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply. The detention of the goods was per se illegal and unwarranted particularly in the light of the fact that the goods accompanied the e-way bills, which were generated for return of the goods - the system and procedure cannot be used against the petitioner particularly in the light of the fact that the detention itself was illegal. Credit note under Section 34 is not required to be issued at the stage, when the goods were being returned without even they having been received by the recipient. Issuance of Credit Note and/or Debit Note under Section 34(1) of the CGST Act, is only for adjustment of tax liability. The petitioner has to merely declare the details of the Credit Note in the monthly return during which Credit Note is issued for adjustment of tax liability - The question of issuing Credit Note also will arise only by the supplier and not by the recipient. Petition allowed.

Summary

Issues Involved:
1. Validity of the detention notice under Section 129(3) of the CGST Act, 2017.
2. Requirement of Credit Note issuance under Section 34 of the CGST Act, 2017.
3. Legality of the penalty imposed on the petitioner.

Summary:

1. Validity of the Detention Notice:
The petitioner challenged the notice dated 30.12.2022 issued under Section 129(3) of the CGST Act, 2017, seeking to impose a penalty. The notice stated that the goods were moving from Tiruppur to Chennai without proper documentation, invoking Section 129. The petitioner argued that the consignment of solar panels was initially transported to Tiruppur but had to be returned to Chennai due to the consignee's refusal to accept delivery because the goods got wet. Fresh e-way bills were generated for this return trip. The High Court found that the goods were accompanied by valid e-way bills and thus, the detention was illegal and unwarranted.

2. Requirement of Credit Note Issuance:
The respondents contended that a Credit Note should have been issued under Section 34 for the returned goods. The petitioner argued that the issuance of a Credit Note or Debit Note arises only after the delivery is taken and goods are returned, which was not the case here as the consignee refused to accept the goods. The Court agreed with the petitioner, stating that Credit Notes are intended for tax adjustments and are not required when goods are returned without being received by the recipient.

3. Legality of the Penalty:
The petitioner paid the penalty to salvage the wet and damaged goods, arguing that the payment was not voluntary. The respondents maintained that the payment concluded the proceedings under Section 129(5). The Court noted that the system for payment under GST only allows for voluntary payments and does not provide an option for payment under protest. Given that the detention was illegal, the Court ruled that the petitioner was not required to issue a Credit Note at the stage when the goods were being returned. Consequently, the impugned notice was set aside, and the writ petition was allowed.