Court deems early bank guarantee encashment unjust, orders refund with interest to petitioner, fresh guarantees provision.

The court found the encashment of bank guarantees before the appeal period expired unjust and oppressive, contrary to legal precedent. It noted the excessive amount held by respondents and the non-constitution of the appellate tribunal, hindering further appeals. The petitioner's request for a refund and provision of fresh bank guarantees was deemed fair. Respondent Nos. 3 and 4 were directed to refund the encashed amount with interest, and the petitioner was to provide fresh guarantees. The writ petition was disposed of without costs.

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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 Rs. 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 Rs. 2,36,63,256.00 and deposited an additional Rs. 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 Rs. 3,07,62,233.00. When added to the amount covered by the bank guarantees, the total came to Rs. 7,80,88,745.00, which was significantly higher than the demand and penalty of Rs. 4,73,26,512.00. The court noted that respondents were holding an excess amount of Rs. 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 Rs. 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 Rs. 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.

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