InW.P. No.17241 of 2023 -MADR HC- Madras High Court grants relief to Luminous Power in GST penalty case, says ‘Credit Note’ not required for goods returned unreceived
Justice C. Saravanan [26-07-2023]

Read Order: Luminous Power Technologies Private Limited v. State Tax Officer and Ors

Chahat Varma

New Delhi, September 8, 2023: The Madras High Court has granted relief to Luminous Power Technologies Private Limited (petitioner) in a GST penalty case. The Court held that the issuance of a credit note under Section 34(1) of the Central Goods and Services Tax Act (CGST Act) is meant solely for the adjustment of tax liability and is not required when goods are being returned without having been received by the recipient.

Briefly stated, the petitioner had challenged a notice, issued under Section 129(3) of the CGST Act and the Tamil Nadu Goods and Services Tax Act (TNGST Act). This notice aimed to impose a penalty on the petitioner. The petitioner's case revolved around the transportation of solar power generating systems/solar panels to a buyer in Tiruppur, with corresponding e-way bills generated for the invoices. During transit from Chennai to Tiruppur, heavy rainfall caused the solar panels to become wet, leading the buyer, Attrib System in Tiruppur, to refuse delivery of the goods mentioned in the invoices. Consequently, the petitioner generated new e-way bills, and re-transported the goods to its factory. However, the goods were intercepted by the Deputy State Tax Officer, Roving Squad-IV, Salem. The petitioner submitted that they paid the penalty to salvage the wet and damaged goods back to the factory, as the goods were at risk of further deterioration.

The single-judge bench of Justice C. Saravananobserved that the Roving Squad had contended that no credit note was issued for the return of the goods that were being re-transported back to the petitioner's factory, as required under Section 34 of the CGST Act.

The bench noted that credit notes or debit notes, as the case may be, are intended solely for the adjustment of tax liabilities in cases where the tax charged in a tax invoice is found to exceed the taxable value or tax payable for the respective supply.

The bench emphasized that the detention of the goods was per se illegal and unwarranted, especially considering that the goods were accompanied by e-way bills that had been generated for the purpose of returning the goods.

The bench concluded that the system and procedures should not be used against the petitioner, especially in light of the fact that the detention of the goods was itself illegal.

Therefore, the Court decided to intervene in the matter and granted relief by allowing this writ petition.