2020 (9) TMI 930 - HC - GST

Demand of GST alongwith interest and penalty as well as encashment of 8 Bank Guarantee - detention of goods on the ground that e-way bills were faulty and undervalued and detention order passed - HELD THAT - Admittedly, there is IGST demand of ₹ 2,36,63,256.00 with equal amount of penalty imposed, together the total dues comes to ₹ 4,73,26,512.00 - As against this, petitioner had paid IGST of ₹ 2,36,63,256.00. At the stage of preferring the first appeals petitioner had deposited 10% of the IGST dues amounting to ₹ 23,66,326.00. Thereafter while filing the second appeals under section 112 of the CGST Act petitioner deposited ₹ 47,32,651.00 being 20% of the IGST dues. Thus, petitioner had deposited an amount of ₹ 70,98,977.00 in addition to IGST dues already deposited. In all petitioner has deposited ₹ 3,07,62,233.00. The amount covered by the eight bank guarantees is ₹ 4,73,26,512.00. If both the figures are added i.e., the amount covered by the bank guarantees and the dues paid by the petitioner, the amount would be ₹ 7,80,88,745.00 (₹ 4,73,26,512.00 ₹ 3,07,62,233.00) which amount is now with the respondents as against demand and penalty of ₹ 4,73,26,512.00. From the above, it is evident that an amount of ₹ 3,07,62,233.00 (₹ 7,80,88,745.00 ₹ 4,73,26,512.00) is lying in excess with the respondents. Even if the appeals filed by the petitioner under section 112 of the CGST Act are dismissed, petitioner would be required to pay a further amount of ₹ 1,65,64,279.00 only whereas respondents are holding onto an amount of ₹ 3,07,62,233.00 of the petitioner much in excess of the dues. There is provision for filing further appeal to the appellate tribunal under Section 112. As per sub-section (1), any person who is aggrieved by an order passed against him under Section 107 or by the revisional authority under Section 108 may prefer appeal to the appellate tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the aggrieved person. As per sub-section 8(b), no appeal shall be filed under subsection (1) unless the appellant has paid a sum equal to 20% of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of Section 107. Subsection (9) clarifies that when the appellant pays the pre-deposit as per sub-section (8), recovery proceedings for the balance amount shall be deemed to be stayed till disposal of the appeal - That being the position and without entering into the controversy as to whether respondent No.4 received request of the petitioner for extension of the bank guarantees before encashment, we are of the view that having regard to the facts and circumstances of the case, the following directions will meet the ends of justice - a. Respondent Nos.3 and 4 shall refund the amount of ₹ 4,73,26,512.00 covered by the eight encashed bank guarantees with applicable statutory interest thereon to the petitioner within a period of four weeks from the date of receipt of a copy of this order; b. Petitioner to furnish fresh bank guarantee(s)from nationalized bank to respondent No.4 for an amount of ₹ 1,65,64,279.00 covering the balance amount of penalty imposed on the petitioner within a period of four weeks from the date of receipt of a copy of this order. Petition disposed off.

Summary

Issues Involved:

1. Legality of encashment of bank guarantees.
2. Excess amount recovered by respondents.
3. Non-constitution of appellate tribunal under Section 112 of the CGST Act.
4. Petitioner's request for refund and provision of fresh bank guarantees.

Issue-wise Detailed Analysis:

1. Legality of Encashment of Bank Guarantees:
The petitioner challenged the encashment of eight bank guarantees totaling ?4,73,26,512.00 by respondent No.4, arguing that it was done without waiting for the expiry of the appeal period. The petitioner had informed respondent No.4 about its intention to renew the bank guarantees. Despite this, the bank guarantees were encashed on 28th March 2019, a day before the petitioner made a part payment under Section 112(8) of the CGST Act. The court found this action contrary to the decision in Mahindra and Mahindra Ltd. vs. Union of India – 59 ELT 505, and deemed it unjust and oppressive.

2. Excess Amount Recovered by Respondents:
The petitioner had paid IGST of ?2,36,63,256.00 and deposited an additional ?70,98,977.00 in two stages (10% while filing the first appeals and 20% while filing further appeals). Thus, the total amount deposited was ?3,07,62,233.00. When added to the amount covered by the bank guarantees, the total came to ?7,80,88,745.00, which was significantly higher than the demand and penalty of ?4,73,26,512.00. The court noted that respondents were holding an excess amount of ?3,07,62,233.00, which was unjust.

3. Non-constitution of Appellate Tribunal under Section 112 of the CGST Act:
The petitioner highlighted that the appellate tribunal under Section 112 of the CGST Act had not yet been constituted in Maharashtra. This non-constitution prevented the petitioner from filing further appeals, which was a significant grievance. The court acknowledged this issue and noted that the petitioner had complied with the pre-deposit requirements for filing appeals, further emphasizing the unjust nature of the respondents' actions.

4. Petitioner's Request for Refund and Provision of Fresh Bank Guarantees:
The petitioner requested the refund of the amount covered by the encashed bank guarantees and offered to secure the respondents' interest by providing fresh bank guarantees for the balance amount of the penalty imposed. The court found this request fair and directed respondent Nos.3 and 4 to refund ?4,73,26,512.00 covered by the encashed bank guarantees with applicable statutory interest within four weeks. Additionally, the petitioner was directed to furnish fresh bank guarantees amounting to ?1,65,64,279.00 within the same period.

Conclusion:
The court concluded that the respondents' actions were unjust and directed them to refund the excess amount with interest. The petitioner was to provide fresh bank guarantees to cover the remaining penalty. The writ petition was disposed of with no order as to costs.