Detained Goods Under GST: Court Allows Release with Bank Guarantees Equal to Penalties Under Section 129

The HC addressed detention of goods for discrepancies between shipments and documentation under GST law. Petitioners' objections to show cause notices were rejected by the assessing authority, who demanded penalty payment within three days. Petitioners sought to furnish bank guarantees equivalent to the penalties for provisional release of goods. The court directed petitioners to provide bank guarantees for the specified penalty amounts, allowing immediate release of goods upon compliance, while dismissing challenges to the notices. The case turned on interpretation of Section 129 of CGST Act, which permits release of detained goods upon payment of applicable tax and penalty or furnishing equivalent security.

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Issues:
1. Detention and seizure of goods for non-compliance.
2. Rejection of objections filed by petitioners.
3. Release of goods subject to statutory conditions.
4. Interpretation of Section 129 of the Central Goods and Service Tax Act, 2017.

Detention and Seizure of Goods for Non-Compliance:
The petitioners conveyed goods under specific vehicles which were intercepted by the respondents. Upon verification, discrepancies were found in the shipment of goods and accompanying documents. Orders of detention proposing penalties were passed due to non-compliances noted. The penalty amounts were specified for each petitioner. The petitioners objected to the proposals in the show cause notice, which were rejected by the assessing authority through impugned notices. The authority's procedure was deemed improper as it effectively passed orders adverse to the petitioners' interests.

Rejection of Objections Filed by Petitioners:
The petitioners had filed objections to the show cause notices, which were subsequently rejected by the assessing authority in the impugned notices dated 01.06.2022. The authority's actions, though styled as notices, were considered as passing orders adverse to the petitioners' interests. Despite objections, the authority proceeded to reject the arguments, leading to the petitioners seeking relief through writ petitions.

Release of Goods Subject to Statutory Conditions:
The impugned notices demanded the petitioners to remit penalty amounts within three days under threat of action under Section 130 of the Act. The petitioners expressed willingness to furnish bank guarantees equivalent to the penalty amounts to obtain the release of goods on a provisional basis and subject to statutory conditions as per Section 129 of the Act. The statutory provision outlined conditions for the release of detained goods, emphasizing payment of applicable tax and penalty or furnishing security equivalent to the penalty amount.

Interpretation of Section 129 of the Central Goods and Service Tax Act, 2017:
Section 129 of the Act addresses the detention, seizure, and release of goods and conveyances in transit for contravention of provisions. It specifies conditions for release, including payment of applicable tax and penalty, or furnishing security equivalent to the penalty amount. The court directed the petitioners to furnish bank guarantees for the penalty amounts quantified in the impugned notices, leading to the immediate release of goods upon compliance. The challenge to the notices was deemed unsuccessful, and the writ petitions were disposed of without costs.

This comprehensive analysis of the judgment highlights the issues of detention and seizure of goods, rejection of objections, release of goods subject to statutory conditions, and the interpretation of Section 129 of the Central Goods and Service Tax Act, 2017, as addressed in the Madras High Court's ruling delivered by Honourable Dr. Justice Anita Sumanth.

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