Bank Guarantee shall not be encashed where appeal is preferred against detention order

Quality Enterprises Vs Assistant State Tax Officer (Kerala High Court)

Hon’ble Kerala High Court in the case of Quality Enterprises v. Assistant State Tax Officer [W.P. (C) No. 18212 of 2020 dated September 18, 2020] has held that bank guarantee shall not be encashed till such time where assessee preferred appeal against the detention order before the Appellate authority.

Facts:

This writ petition has been filed by Quality Enterprises (“Petitioner”) seeking a direction to Appellate Authority to consider and pass order on appeal expeditiously and to keep in abeyance coercive steps for encashing bank guarantee, whereby goods have been detained by the Assistant State Tax Officer (“Respondent / Authority”) noticing a discrepancy in the documents that ought to have accompanied the transportation of the goods. The Petitioner furnished a bank guarantee before the respondent for enabling an expeditious clearance of the goods and the vehicle.

Issue:

Whether bank guarantee shall not be encashed where appeal is preferred against the detention order?

Held:

The Hon’ble Kerala High Court in W.P. (C) No. 18212 of 2020 dated September 18, 2020 held as under:

• On a consideration of the facts and circumstances of the case and the submissions made by the learned councils in the Court and finding that a final order under Section 129(3) of Central Goods and Services Tax Act, 2017 (“CGST Act”) in Form GST MOV-09 has already been passed.
• The remedy of the Petitioner lies in moving an appeal before the Appellate Authority, and if the Petitioner wants a clearance of the goods and the vehicle in the meanwhile, he has to produce a bank guarantee for the amounts confirmed through the detention order.
• Since the Petitioner has furnished bank guarantee and preferred an appeal before the Appellate Authority, directed the First Appellate Authority, to consider and pass orders on appeal within three weeks, after hearing the petitioner either through a physical hearing or through video conferencing.
• Further, stated that bank guarantee shall not be encashed till such time orders are passed by the First Appellate Authority as directed and the order communicated to the Petitioner.

Relevant Provision:

Section 129 of the CGST ACT:

“129. Detention, seizure and release of goods and conveyances in transit

 (1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,––

(a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.

(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).

(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within ¹[fourteen days] of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer.”

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

In the present writ petition, the petitioner impugns an order passed by the respondent in Form GST Mov 09, whereby goods have been detained by the respondent noticing a discrepancy in the documents that ought to have accompanied the transportation of the goods. When the matter came up for admission, it was pointed out by the learned Government Pleader that inasmuch as the final order under Section 129, in Form GST Mov 09, has already been passed, the remedy of the petitioner lies in moving an appeal before the appellate authority, and if the petitioner wants a clearance of the goods and the vehicle in the meanwhile, he has to produce a bank guarantee for the amounts confirmed through the detention order.

2. Taking cue from the said submission, the petitioner has since furnished a bank guarantee before the respondent for enabling an expeditious clearance of the goods and the vehicle. He has also produced as Ext.P12, a copy of the Appeal Memorandum that he has preferred under Section 107 of the GST Act, against Ext.P11 order of detention. The limited prayer at this stage is for a direction to the First Appellate Authority to consider and pass orders on Ext.P12 appeal expeditiously, and to keep in abeyance coercive steps for encashing the bank guarantee that was furnished by him (Ext.P14) before the respondent.

3. I have heard the learned counsel for the petitioner as also the learned Government Pleader for the respondents.

On a consideration of the facts and circumstances of the case and the submissions made across the Bar, and finding that a final order under Section 129(3) in Form GST Mov 09 has already been passed, I dispose the writ petition with a direction to the First Appellate Authority, before whom Ext.P12 appeal has been preferred by the petitioner, to consider and pass orders on Ext.P12 appeal within three weeks from the date of receipt of a copy of this judgment, after hearing the petitioner either through a physical hearing or through video conferencing. It is made clear that Ext.P14 bank guarantee furnished before the respondent shall not be encashed till such time as orders are passed by the First Appellate Authority as directed and the order communicated to the petitioner. The petitioner shall produce a copy of this judgment together with a copy of the writ petition before the respondents and the First Appellate Authority for further action.

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