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Madras
High Court Upholds GST Circular and Dismisses Double Taxation Claims by Chetna
Steel Tubes
Case Summary: M/s. Chetna Steel Tubes Private Limited vs. Goods and
Service Tax Network (GSTN) & Others
Court:
High Court of Judicature at Madras
Case Number: W.P.Nos.19976
& 19977 of 2021
Date of Order: 08.08.2024
Judges:
Hon'ble Mr. Justice R. Suresh Kumar and Hon'ble Mr. Justice C. Saravanan
Facts of the Case:
M/s. Chetna Steel Tubes
Private Limited, the petitioner, filed writ petitions challenging the actions
and orders of the Goods and Service Tax Network (GSTN) and other respondents,
including the Central Board of Indirect Taxes & Customs (CBIC) and the
Assistant Commissioner of GST, Chennai North Zone.
The core issue in the
petitions revolves around the petitioner’s challenge to specific debit entries
made in their electronic liability ledger on 28.04.2021 and 29.04.2021, and the
validity of a GST circular dated 13.04.2018. The petitioner argued that these
entries were made arbitrarily and resulted in a double tax liability. They
contended that the imposition of tax at the detention stage under Section 129
of the CGST Act, coupled with the regular tax payment in the GSTR-3B return,
effectively amounted to double taxation, which is illegal.
Petitioner's Submissions:
The petitioner challenged
the legality of the GST circular dated 13.04.2018, particularly Para 2(h),
which mandates the creation of a tax liability in the electronic liability
register after the payment of tax and penalty under Section 129 of the CGST Act.
The petitioner argued
that the tax was being levied twice: first during the detention of goods under
Section 129 and again when the tax was paid during the regular filing of
GSTR-3B returns. This, they claimed, was illegal and against the principles of
taxation.
The petitioner sought the
quashing of the debit entries dated 28.04.2021 and 29.04.2021, and the relevant
provisions of the circular that allowed such entries.
Respondents' Submissions:
The respondents,
represented by Senior Standing Counsel Mr. A.P. Srinivas, argued that the
provisions under Section 129 of the GST Act are clear and enforceable. They
maintained that the purpose of Section 129 was to ensure compliance and recover
applicable taxes on goods in transit that did not meet statutory requirements.
The respondents explained
that the tax collected under Section 129 is not an additional levy but a
recovery of tax that is otherwise due on the goods. Therefore, there is no
question of double taxation as alleged by the petitioner.
They also argued that the
petitioner could claim a refund of any excess tax paid when filing their
GSTR-3B returns, thus negating the concern of double taxation.
Findings and Judgment:
The court carefully
considered the arguments presented by both sides. The judges noted that Section
129, as it stood prior to 01.01.2022, required the payment of tax and penalty
for the release of detained goods. However, post-01.01.2022, the law was amended,
and only a penalty (at 200% of the tax) was imposable without requiring an
additional tax payment.
The court found that the
petitioner’s apprehension of being taxed twice was misplaced. The judges
clarified that the purpose of Section 129 was to recover taxes on goods in
transit where statutory compliance was lacking. The tax paid during detention
under Section 129 was to be debited from the assessee’s electronic credit
account, and if any excess tax was paid in the regular returns, the petitioner
had the right to claim a refund.
The court ruled that the
circular dated 13.04.2018 and the subsequent debit entries in the petitioner’s
electronic liability ledger were valid and in accordance with the law. The
judges dismissed the writ petitions, holding that the petitioner's concerns
were unwarranted and that the actions taken by the GST authorities were lawful.
Conclusion: The
High Court dismissed the writ petitions filed by M/s. Chetna Steel Tubes
Private Limited. The court upheld the validity of the GST circular and the
actions of the GST authorities, ruling that there was no double taxation and
that the petitioner had a remedy to claim a refund if excess tax was paid. No
costs were awarded, and the connected miscellaneous petitions were also closed.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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