Intro:
Refund for perishable goods lost due to GST delay is legally valid when loss occurs due to departmental inaction. In a recent case, the High Court not only upheld the refund but also directed a ₹50 lakh compensation from the erring officer’s pocket.
Key grounds:
- Goods were perishable (e.g., fruits, seafood, milk products)
- Held unlawfully or without valid reason
- Resulted in total loss of goods
- Officer acted without authority or due process
Legal Reference: Compensation for GST Officer’s Misuse of Power
Case Law: M/s. M.S. Traders vs State of Gujarat (2024)
- Detention had no legal basis as e-Way bill was valid.
- The High Court ordered:
- Full refund of tax and penalty
- ₹50 lakh compensation from officer’s salary
Court’s Observation:
This was not a minor lapse but “blatant abuse of power causing irreversible business loss.”
GST Rules That Were Violated
| Provision | Rule/Section | What It Says |
|---|---|---|
| Detention Rules | Rule 138C | Proper officer must record reasons in FORM MOV-06 |
| Seizure Conditions | Section 129 | Detention only if tax evasion is prima facie evident |
| Compensation Logic | Article 300A | No person shall be deprived of property except by authority of law |
Practical Guidance: What to Do if This Happens
- Keep strong documentation: e-Way bill, tax invoice, movement log
- File reply to SCN: Mention perishable nature and urgency
- Approach High Court: Use writ jurisdiction (Article 226) for time-sensitive relief
- Claim refund: File GST RFD-01 after order
- Seek compensation: Cite precedents like M.S. Traders
Expert Tip: Officers Are Personally Liable Too
As per Union of India vs Mohit Minerals (2022) and now M.S. Traders (2024), courts are increasingly fixing personal liability on officers who act in bad faith. Businesses should not hesitate to claim compensation for gross negligence.
Why This Case Matters to You
- If departmental obstruction leads to actual business loss, compensation is a constitutional right.
- This also sends a strong message to prevent arbitrary detentions under GST.
Link to Related Blog
🔗 GST Refund Process: Step-by-Step Guide
FAQs
Q1. Can compensation be claimed under GST law?
While GST Act doesn’t directly provide for compensation, courts have awarded it under constitutional rights.
Q2. Is refund allowed for goods that never reached the buyer?
Yes, if the delay was due to illegal GST detention and goods perished.
Q3. Who pays the compensation – department or officer?
Courts can direct either, but personal recovery from officer is possible in gross misuse cases.