Court modifies interim order, requires bank guarantee for seized goods under CGST Act.

The court allowed the respondents' application under Article 226(3) of the Constitution, modifying the interim order to require the petitioner to furnish a bank guarantee as per Section 67(6) of the CGST Act, 2017 and Rule 140 of the CGST Rules, 2017 for the release of seized goods. The observations were confined to the application's disposal and would not affect the final writ petition outcome. The stay application was disposed of accordingly.

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Issues Involved:
1. Legality of the seizure of goods without issuing a show cause notice.
2. Applicability of Section 67(6) of the CGST Act, 2017 and Rule 140 of the CGST Rules, 2017.
3. Jurisdictional authority for the seizure and search operations.
4. Validity of the interim order dated 21/5/2021.
5. Relevance and applicability of cited judgments.

Detailed Analysis:

1. Legality of the Seizure of Goods Without Issuing a Show Cause Notice:
The petitioner argued that Rs. 50 lakh was recovered under duress without issuing a show cause notice under Section 74 of the CGST Act, 2017, and that the seizure of goods was illegal as the goods were duly accounted for. The respondents contended that the seizure was valid under Section 67(2) of the Act due to discrepancies found during inspection, and the petitioner’s goods were not secreted.

2. Applicability of Section 67(6) of the CGST Act, 2017 and Rule 140 of the CGST Rules, 2017:
The respondents argued that the interim order allowing the release of goods without a bank guarantee was contrary to Section 67(6) and Rule 140, which require a bond and a bank guarantee for provisional release. The petitioner contended that as a registered person, actions should be under Section 35(6) read with Sections 73 or 74, not Section 67(6). The court noted that Section 67 could be invoked if circumstances indicated concealment, making the seizure prima facie legal.

3. Jurisdictional Authority for the Seizure and Search Operations:
The petitioner claimed that only the Directorate General of GST Intelligence (DGGI) had jurisdiction, and the respondents’ actions were without jurisdiction. The respondents maintained that their actions were in line with statutory provisions and that CGST authorities had jurisdiction under Section 6(2)(b) of the Act. The court found the jurisdictional plea premature for vacating/modifying the interim order.

4. Validity of the Interim Order Dated 21/5/2021:
The interim order allowed the release of goods based on a surety bond without insisting on a bank guarantee. The respondents sought vacation of this order, arguing it was against statutory provisions. The court, referencing the Supreme Court’s observations in Kay Pan Fragrance, held that statutory mechanisms for provisional release must be followed, thus modifying the interim order to require a bank guarantee.

5. Relevance and Applicability of Cited Judgments:
The respondents cited Kay Pan Fragrance, Maa Karni Traders, and JVG Super Cargo Service to support their position. The petitioner argued these cases were not relevant as they pertained to transporters, not registered persons. The court dismissed this distinction, emphasizing that Section 67 applies equally to transporters and registered persons. The court followed the Supreme Court’s directive in Kay Pan Fragrance, mandating adherence to statutory provisions for provisional release.

Conclusion:
The court allowed the respondents’ application under Article 226(3) of the Constitution, modifying the interim order to require the petitioner to furnish a bank guarantee as per Section 67(6) of the Act and Rule 140 of the Rules for the release of seized goods. The observations were confined to the application’s disposal and would not affect the final writ petition outcome. The stay application was disposed of accordingly.

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