2021 (10) TMI 199 - HC - GST

Court rules in favor of petitioner, allows deposit of tax & penalty before goods confiscation. Provisional release granted pending appeal.

The court ruled in favor of the petitioner, emphasizing the right to deposit tax and penalty before goods are confiscated. It directed provisional release ... Provisional release under Rule 140(1) of the CGST Rules - independence of Section 129 and Section 130 - opportunity to deposit tax and penalty under Section 129 - bank guarantee not to be encashed pending appeal - availability of appellate remedy against orders of demand, penalty and confiscationProvisional release under Rule 140(1) of the CGST Rules - opportunity to deposit tax and penalty under Section 129 - independence of Section 129 and Section 130 - Petitioner entitled to provisional release of seized goods and conveyance on fulfilling conditions of Rule 140(1) despite earlier confiscation proceedings. - HELD THAT: - The Court found that when the order of demand of tax and penalty was issued, the statutory period for depositing (14 days from detention) had already lapsed, resulting in the petitioner not being given an effective opportunity to deposit the tax and penalty as contemplated under Section 129. The Court observed that the powers under Section 129 are independent of those under Section 130 and that Rule 140(1) permits provisional release of seized goods upon execution of bond and furnishing of security (such as a bank guarantee) for the applicable tax, interest and penalty. In the exercise of its discretion the Court directed that, without adjudicating the finality of confiscation or other orders, if the petitioner fulfils the conditions of Rule 140(1) the respondents shall provisionally release the goods subject to the final outcome of proceedings available to the petitioner, including the appellate remedy.Directed provisional release of goods and conveyance on compliance with Rule 140(1), leaving other orders open to challenge before the appellate forum.Bank guarantee not to be encashed pending appeal - availability of appellate remedy against orders of demand, penalty and confiscation - Bank guarantee furnished under Rule 140(1) shall not be encashed until final disposal of the appeal/writ petition. - HELD THAT: - The Court ordered that any bank guarantee submitted by the petitioner in terms of Rule 140(1) shall not be encashed by the revenue until the final disposal of the appellate or writ proceedings. The Court also recorded that the petitioner may pursue available statutory appellate remedies against the orders impugned and expressed expectation that the Appellate Authority decide the appeal promptly, though it did not set aside or decide the merits of the confiscation or demand orders themselves.Bank guarantee to remain unencashed pending final adjudication; petitioner to pursue appellate remedies.Final Conclusion: Writ petition disposed by directing provisional release of seized goods and conveyance on compliance with Rule 140(1), with a stipulation that any bank guarantee furnished shall not be encashed until final disposal of the appeal/writ; other orders remain open for challenge before the appropriate appellate forum. Issues:1. Opportunity for depositing tax and penalty before confiscation of goods.2. Provisional release of goods under Rule 140(1) of CGST Rules.3. Availability of appeal for redressal of grievances.Analysis:Issue 1: The petitioner challenged the confiscation of goods without being given an opportunity to deposit the tax and penalty demanded. The court noted that the petitioner was not provided with the requisite 14-day period to make the payment before the final order of confiscation was passed. The court emphasized that under Section 129, there should be a chance for provisional release of goods before any decision under Section 130 is made. The court directed that the petitioner should be given a chance to avail provisional release under Rule 140(1) if the conditions are fulfilled.Issue 2: The court observed that the petitioner had the right to challenge the order of confiscation before the Appellate Authority. It directed that if the petitioner meets the conditions of Rule 140(1) of CGST Rules, the goods should be provisionally released by the respondents, pending the final outcome of the appeal. The court also instructed that the Bank Guarantee submitted by the petitioner should not be encashed until the appeal is finally disposed of.Issue 3: The petitioner had filed an appeal as per the court's directions, but the second appeal to the Tribunal was not possible as it had not been constituted yet. The court issued notice to the respondent(s) to appear on a specified date. In the meantime, it directed the provisional release of goods if the petitioner fulfills the conditions of Rule 140(1) of the CGST Rules, with the Bank Guarantee not to be encashed until the final disposal of the writ petition. The court emphasized the importance of the Appellate Authority deciding the appeal promptly, preferably within two months.