No encashment of bank guarantee until expiry of 3 months from Order: Kerala HC:

Varahamurthi Flexirub Industries Pvt. Ltd Vs State Tax Officer (Kerala High Court)

Varahamurthi Flexirub Industries (P.) Ltd. (Petitioner) received an order of confirmation of penalty from the State Tax Officer (Respondents). The Petitioner had challenged the order of the Respondents in directing bank to invoke bank guarantee and to forward demand draft of value of said bank guarantee.

The Petitioner contended that as per the provisions of Sections 78 of the Central Goods and Services Act, 2017 ( CGST Act) read with Section 107 of the CGST Act, the Petitioner had time of three months for depositing the disputed amount as per assessment order.

The Hon’ble Kerala High Court relying upon the provisions of Section 78 and Section 107 of the CGST Act directed the Respondents not to encash bank guarantee and to put forward the amount under the bank guarantee by demand draft, accordingly quashed and set aside the order. Also directed the Petitioner to continue the  bank guarantee till filing of the appeal.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Dated this the 16^th day of February 2021

Heard both sides. The petitioner, who has suffered an order of confirmation of penalty at the hands of the respondent-State Tax Officer, is challenging the action of the said authority in directing the 2^nd respondent-Bank to invoke bank guarantee and to forward the demand draft of the value of the said bank guarantee to the 1^st respondent.

2. Learned counsel for the petitioner has rightly pointed out the provisions of Section 107 of the Goods and Service Tax Act which provide for pre deposit. He also relied on Section 78 of the said Act to demonstrate that the petitioner has time of three months for depositing the amount as per the assessment. With this, learned counsel submitted that the direction contained in the order at Ext.P3 to the 2^nd respondent directing the said respondent to encash the bank guarantee and forward the demand draft of the value of the bank guarantee to the 1st respondent is per se illegal. It is further argued that the petitioner is intending to file an appeal within two or three weeks though limitation for filing such statutory appeal is upto 15.05.2021.

3. Learned Government Pleader opposed the writ petition.

4. Keeping in mind the provisions of Sections 78 and 107 of the GST Act, this writ petition deserves to be allowed with the following directions:

The 2^nd respondent shall not comply with the directions of the 1^st respondent to encash bank guarantee and to forward the amount under the bank guarantee by demand draft to the 1st respondent and the said direction is quashed and set aside. However, the petitioner shall continue the bank guarantee till filing of the appeal. The parties to act on authenticated copy of this judgment.

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