The Madras High Court (HC) has held that no credit notes were issued under section 34 of the Central Goods and Service Tax Act, 2017 when goods were returned without even having received by the recipient. As per Section 34 of the CGST Act, 2017 Purpose of Credit Note / Debit Note is applicable only when the return of goods is due to unfructified sales/refusal of the consignee to take delivery of goods. Since the buyer refused to take delivery of the goods the subject goods were re-transported to the factory of the petitioner.
Luminous Power Technologies Private Limited, the petitioner has challenged the impugned notice dated 30.12.2022 issued under Section 129(3) of the Central Goods and Services Tax (CGST) Act, 2017 read with the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017, which sought for imposing the penalty on the petitioner.
The goods in movement were inspected under the provisions of sub-section (3) of section 68 of the Central Goods and Services Tax Act, 2017 read with sub-section (3) of section 68 of the State/Union Territory Goods and Services Tax Act, 2017 or under section 20 of the Integrated Goods and Services Tax Act, 2017 read with sub-section (3) of section 68 of the Central Goods and Services Tax Act, 2017 on 29.12.2022 and certain discrepancies were noticed.
As per the invoice, goods are transported from Chennai to Tiruppur. At the time of interception, goods are moving from Tiruppur to Chennai. It is presumed that goods are returnable due to unfructified sales. However, in terms of sec 34 of the Act, any goods returned due to unfructified sales should accompanied with delivery challan/credit/debit note.
The taxable person has failed to issue the credit/debit note. Therefore, the goods under movement are treated as movement without document prescribed under sec 34 read with rule 55 of the Act thereby invoking sect 129 is warranted. Accordingly, a penalty under sec 129 of the Act is levied.
The goods and the conveyance used for the movement of goods were detained under sub-section (3) of section 68 of the Central Goods and Services Tax Act, 2017 and sub-section (1) of section 129 of the Central Goods and Services Tax Act, 2017 read with sub-section (3) of section 68 of the State/Union Territory Goods and Services Tax Act, 2017 or under section 20 of the Integrated Goods and Services Tax Act, 2017 read with sub-section (3) of section 68 of the Central Goods and Services Tax Act, 2017 by issuing an order of detention in FORM GST MOV 06.
It was observed that under Section 129(3) of the CGST Act, the proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
Under Section 129(5) of the CGST Act, on payment of the amount referred to in subsection (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.
Justice C Saravanan held that “The petitioner has to merely declare the details of the Credit Note in the monthly return during which the Credit Note is issued for adjustment of tax liability. The question of issuing Credit Notes also will arise only by the supplier and not by the recipient.”
The court allowed the Writ Petition and set aside the impugned notice of the first respondent.
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