GST: Detention: Petitioner entitled for return of surety bond & bank guarantee furnished upon deposit of 25% of penalty

New Modern Industries Vs. Commercial Tax Officer (Enforcement) & Anr  (Karnataka High Court)

Hon’ble High Court of Karnataka declared that if a taxable person prefers an appeal U/s. 107 of the CGST/SGST Acts against an order passed U/s. 129 of the said Acts after remitting 25 % of the penalty imposed being pre deposit such person is not required to pay penalty amount levied/to furnish bank guarantee along with a surety bond. In other words, both conditions viz furnishing bank guarantee equal to the penalty imposed (along with the surety bond) and to remit pre –deposit @ 25 % of penalty are not to be complied with simultaneously.

 FACTS OF THE CASE

A consignment of the writ petitioner was detained, against which this writ petition was filed. During the pendency of the petition an order U/s.129[3] of the CGST Act, 2017 has been issued on 17.03.2022 and even the subject conveyance is released as against the surety bond and the bank guarantee that is furnished by the petitioner. The petitioner has offered surety and furnished the bank guarantee for 100% of the penalty. While so, it is found that the petitioner’s remedy as against such order is U/s.107 of the CGST Act, and the petitioner can avail such remedy upon deposit of 25% of the penalty as contemplated under the proviso to Section 107 of the CGST Act.

HELD BY THE COURT

♦ The petitioner, if aggrieved, must avail permitted remedy U/s. 107 of the CGST Act. If the requirement in law is that the petitioner must deposit only 25% of the penalty to avail such remedy, the petitioner cannot be fastened with the responsibility to pay 100%. Therefore, the writ petition stands disposed of with liberty to the petitioner to avail remedy under Section 107 of the CGST Act upon deposit of 25% of the penalty.

♦ The petitioner shall be entitled for return of the surety bond and the bank guarantee furnished. If the petitioner, upon filing the appeal with the deposit as aforesaid, files with the first respondent the details of the appeal and the deposit made, the first respondent shall within ten [10] working days from the date of receipt of such information, return the bank guarantee/surety bond furnished.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

The petitioner, who is the owner of certain goods, has sought for the following reliefs:

‘For quashing the first respondent’s order dated 03.03.2022 [Annexure “F”] for physical verification/inspection of the conveyance, goods and documents issued in form GST MOV-2 for goods conveyance bearing No. KA 32A 2003; and

For directions in the nature of Mandamus directing the first respondent to release the goods vehicle in transit bearing Lorry No. KA 32A 2003 as per the order of physical verification in Form GST-02 dated 03.03.2022 vide Annexure “F”.’

It is submitted by Sri. K.M. Shivayogiswamy, learned counsel for the petitioner, and Sri. K. Hemakumar, learned Additional Government Advocate, that during the pendency of the petition an order, as contemplated under section 129[3] of the Central Goods and Services Tax Act, 2017 [for short, ‘the CGST Act’], is issued on 17.03.2022 and even the subject conveyance is released as against the surety bond and the bank guarantee that is furnished by the petitioner. The petitioner has offered surety and furnished the bank guarantee for 100% of the penalty. The petitioner’s remedy as against such order is under Section 107 of the CGST Act, and the petitioner can avail such remedy upon deposit of 25% of the penalty as contemplated under the proviso to Section 107 of the CGST Act. They also submit that in the light of these subsequent events, the petition could be disposed of.

If the petitioner has obtained release of the vehicle against furnishing surety bond and bank guarantee [100% of the penalty] and there is an order as contemplated under section 129[3] of the CGST Act, the petitioner, if aggrieved, must avail permitted remedy under Section 107 of the CGST Act. If the requirement in law is that the petitioner must deposit only 25% of the penalty to avail such remedy, the petitioner cannot be fastened with the responsibility to pay 100%.

Therefore, the writ petition stands disposed of with liberty to the petitioner to avail remedy under Section 107 of the CGST Act upon deposit of 25% of the penalty. The petitioner shall be entitled for return of the surety bond and the bank guarantee furnished. If the petitioner, upon filing the appeal with the deposit as aforesaid, files with the first respondent, the details of the appeal and the deposit made, the first respondent shall within ten [10] working days from the date of receipt of such information, return the bank guarantee/surety bond furnished. It is needless to observe that all contentions of the parties are left open.

GST: Detention: Petitioner entitled for return of surety bond & bank guarantee furnished upon deposit of 25% of penalty