2022 (11) TMI 28 - HC - GST

Bank Guarantee Dispute: GST Petitioner Must Deposit 20% of Tax Amount to Preserve Appeal Rights Under Section 129

The HC ruled on a GST dispute involving bank guarantee invocation under Section 129. The court directed the petitioner to deposit 20% of the disputed tax ... Invocation of bank guarantee pending constitution of Appellate Tribunal - Condition for maintaining appeal under Section 112(8)(b) of the CGST/SGST Act - Stay of enforcement measures under Section 129 of the CGST/SGST Act - Treatment of interim deposit as compliance when Tribunal is later constituted - Obligation to keep bank guarantee alive and consequence of non-renewalInvocation of bank guarantee pending constitution of Appellate Tribunal - Stay of enforcement measures under Section 129 of the CGST/SGST Act - Condition for maintaining appeal under Section 112(8)(b) of the CGST/SGST Act - Whether the authorities may invoke the bank guarantee furnished in proceedings under Section 129 of the CGST/SGST Act pending constitution of the Appellate Tribunal, and on what condition a direction restraining such invocation can be issued. - HELD THAT: - The Court held that a direction restraining invocation of the bank guarantee can be issued only if the petitioner complies with the condition that Section 112(8)(b) of the CGST/SGST Act requires for maintaining an appeal before the Appellate Tribunal. Although the Appellate Tribunal is yet to be constituted and the appeal period has not commenced, the petitioner must remit an amount equivalent to the deposit mandated by Section 112(8)(b) (20% of the tax in dispute) as a condition for stay of invocation of the bank guarantee. This interim payment is required notwithstanding the non-constitution of the Tribunal in order to secure a stay of enforcement measures while preserving the statutory prerequisite for pursuing an appeal when the Tribunal is constituted. [Paras 4, 5]Petitioner directed to remit the amount payable under Section 112(8)(b) (20% of tax in dispute) within two weeks; on such remittance, any bank guarantee furnished in proceedings under Section 129 shall not be invoked pending constitution of the Appellate Tribunal.Treatment of interim deposit as compliance when Tribunal is later constituted - Obligation to keep bank guarantee alive and consequence of non-renewal - Whether the interim payment made by the petitioner in terms of the Court's direction will be treated as sufficient compliance of Section 112(8)(b) once the Appellate Tribunal is constituted, and the consequence if the bank guarantee is not kept alive. - HELD THAT: - The Court directed that the amount remitted by the petitioner pursuant to the order shall be treated as sufficient compliance with Section 112(8)(b) when the Appellate Tribunal is constituted, and the petitioner will not be required to deposit any further amount under that provision for maintaining an appeal. The petitioner is also required to keep the bank guarantee alive; failure to renew the bank guarantee in time will permit the officer to invoke the bank guarantee notwithstanding the Court's directions. [Paras 5]Interim payment to be treated as compliance of Section 112(8)(b) once Tribunal is constituted; petitioner must keep bank guarantee alive and failure to renew permits invocation despite this order.Final Conclusion: Writ petition disposed of: petitioner to deposit the amount required by Section 112(8)(b) within two weeks to restrain invocation of the bank guarantee in Section 129 proceedings; such deposit will stand as compliance when the Appellate Tribunal is constituted, subject to the petitioner keeping the bank guarantee alive, failing which the officer may invoke it. Issues:1. Invocation of bank guarantee under Section 129 of CGST/SGST Act.2. Applicability of appeal period and bank guarantee invocation.3. Requirement of deposit for maintaining an appeal before the Appellate Tribunal.Analysis:1. The petitioner challenged the proceedings under Section 129 of the CGST/SGST Act, where a bank guarantee was produced to release goods and conveyance. The 1st Appellate Authority confirmed the original proceedings, leading to the petitioner's apprehension of the bank guarantee being invoked before the constitution of the State Appellate Tribunal.2. The petitioner relied on a previous judgment to argue that the bank guarantee should not be invoked until the appeal period is over, emphasizing that the appeal period commences only when the Appellate Tribunal is constituted. The Circular No.132/2/2020-GST was cited to support this proposition.3. The Senior Government Pleader contended that for maintaining an appeal before the Appellate Tribunal under Section 112 of the CGST/SGST Act, the petitioner must deposit an amount equivalent to 20% of the tax in dispute. The court held that despite the non-constitution of the Appellate Tribunal, the petitioner must deposit 20% of the tax amount in dispute to stay the invocation of the bank guarantee.4. The court directed the petitioner to remit the required amount under Section 112(8)(b) of the CGST/SGST Act within two weeks for maintaining an appeal before the Appellate Tribunal. This payment was deemed as sufficient compliance with the provision, ensuring that the bank guarantee would not be invoked. The petitioner was not required to deposit any further amount for maintaining the appeal once the Tribunal is constituted.5. The judgment concluded by specifying that failure to renew the bank guarantee within the stipulated time would allow the officer to invoke it. However, the amount paid by the petitioner was considered as meeting the requirements of Section 112(8)(b) of the CGST/SGST Act, and no additional deposit would be necessary for maintaining the appeal in the future.