2022 (6) TMI 850 - HC - GST

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 ... Detention, seizure and release of goods and conveyances in transit - release of seized goods on furnishing security under Section 129(1) - bank guarantee as security for provisional release - provisional release subject to statutory conditions - threat of action under Section 130 (confiscation of goods or conveyances) - adjudicatory procedure for show cause notices and rejection of objectionsRelease of seized goods on furnishing security under Section 129(1) - bank guarantee as security for provisional release - provisional release subject to statutory conditions - Seized goods are to be released upon furnishing bank guarantees equivalent to the amount quantified in the impugned notices, subject to satisfaction of conditions in Section 129(1). - HELD THAT: - The Court construed Section 129(1) as mandating release of goods after detention or seizure if the conditions in clauses (a) to (c) are satisfied. Clauses (a) and (b) prescribe the amounts payable in different contingencies, while clause (c) permits release upon furnishing security equivalent to the amount payable under clause (a) or (b) in the prescribed form. The petitioners offered to furnish bank guarantees equivalent to the amounts quantified in the impugned notices. In accordance with the statutory scheme, upon receipt of proper bank guarantees, the Officer was directed to release the goods forthwith, subject to the statutory conditions in Section 129(1).Petitioners may furnish bank guarantees in proper form for the amounts quantified in the impugned notices and, upon such furnishing, the goods shall be released forthwith by the Officer.Adjudicatory procedure for show cause notices and rejection of objections - threat of action under Section 130 (confiscation of goods or conveyances) - Procedural irregularity in the form of notices that effectively rejected objections was noted but did not warrant setting aside; the challenge to the impugned notices fails. - HELD THAT: - The Court observed that although the impugned communications were styled as 'notices', the assessing officer proceeded to reject the petitioners' objections and pass adverse orders without following the proper adjudicatory procedure. Despite recording that the procedure 'does not appear to be in order', the Court did not antecedently set aside the notices. Given the petitioners' willingness to furnish bank guarantees and the direction for provisional release under Section 129(1), the Court found no further relief appropriate and disposed of the petitions. The notices remain challenged on merits but were not quashed on procedural grounds in these writ petitions.Notwithstanding the procedural defect recorded, the challenge to the impugned notices fails and no relief is granted on that ground.Final Conclusion: Writ petitions disposed by directing provisional release of the seized goods on the petitioners furnishing bank guarantees in proper form equivalent to the amounts quantified in the impugned notices; procedural irregularity in the notices was noted but did not result in quashing, and no costs were awarded. 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.