2019 (8) TMI 595 - HC - GST

Validity of Section 129 of the Central Goods and Services Tax Act, 2017 - Release of goods on the basis of Bank Guarantee - Section 129 of the CGST Act - restraint on encashment of the Bank Guarantee - HELD THAT - The interim relief sought for in the writ petition is to restrain encashment of the Bank Guarantee. If it is granted, it will amount to an order in anticipation that the adjudication will culminate in imposition of penalty. If such an anticipatory restrainment is put on the respondents, as observed by the learned Single Judge, that will be in a manner defeating the interest of the respondents who ordered release of the goods by securing the probable amount which may be due after the adjudication, in accordance with the provisions contained in Section 129 of the Act - there is no illegality, error or impropriety in the judgment of the learned Single Judge. The interest of justice on equitable basis can be achieved by issuing a direction to the respondents not to encash the Bank Guarantee furnished by the appellant, if ultimately the adjudication goes against them and if penalty is imposed in such proceedings, until the expiry of 14 days from the date of service of order on such adjudication.

Summary

Issues:
Challenge to validity of Section 129 of the Central Goods and Services Tax Act, 2017 - Imposition of tax and penalty for technical breaches - Interim relief sought to restrain encashment of Bank Guarantee.

Analysis:
The petitioner challenged the validity of Section 129 of the CGST Act, specifically regarding the imposition of tax and penalty for technical breaches without tax evasion, citing violation of constitutional articles. The petitioner sought interim relief to prevent the respondents from encashing the Bank Guarantee related to detained goods. The Single Judge noted that the goods were released based on the Bank Guarantee as per Section 129 compliance. The Judge opined that granting the requested interim order would deviate from the release conditions and that the petitioner had legal remedies available post-adjudication. The appellant argued that encashing the Bank Guarantee upon penalty imposition would defeat the purpose of the writ petition, referencing a similar case where encashment was restrained.

The Court acknowledged the timing of the writ petition filed after goods release with a Bank Guarantee and ongoing adjudication. Granting the requested relief would anticipate penalty imposition, potentially prejudicing the respondents who secured the amount due post-adjudication as per Section 129. The Court found no illegality in the Single Judge's decision, emphasizing the need for balance in such cases. However, the Court clarified that the appellant could challenge any penalty imposition order and seek interim relief against Bank Guarantee encashment in subsequent proceedings. To ensure equity, the Court directed the respondents not to encash the Bank Guarantee if penalties were imposed until 14 days post-adjudication order service, allowing the appellant time to challenge the penalty.

In conclusion, the Court upheld the Single Judge's decision, highlighting the importance of balancing interests and legal remedies available post-adjudication. The Court's directive aimed to maintain fairness by providing the appellant with the opportunity to challenge penalties and seek interim relief if needed, while also considering the respondents' interests in securing due amounts post-adjudication.