Aashmi Trades VS Assistant State Tax Officer

The petitioner found themselves embroiled in legal proceedings under Section 129 of the Central Goods and Services Tax/State Goods and Services Tax Act (CGST/SGST Act). During the pendency of these proceedings, the petitioner furnished a bank guarantee as collateral, which led to the release of the goods and conveyance in question. Dissatisfied with the outcome, the petitioner sought recourse by challenging the aforementioned proceedings before the 1st Appellate Authority. However, their appeal was met with further disappointment as the 1st Appellate Authority upheld the decisions of the original authority.

Now, the petitioner finds themselves in a precarious situation, apprehensive that the bank guarantee they provided may be invoked pending the constitution of the State Appellate Tribunal. Citing a precedent set forth by the Kerala High Court in the case of M/s. Podaran Foods India Pvt. Ltd. Vs. State of Kerala [2021 (1) TMI 552], the petitioner contends that it would be unjust for the authorities to invoke the bank guarantee before the expiration of the appeal period. They argue that since the Appellate Tribunal has yet to be constituted, the appeal period has not commenced, and as such, they are entitled to a directive preventing the invocation of the bank guarantee until the appellate process is exhausted.

In essence, the petitioner seeks legal protection to safeguard their interests during the interim period until the Appellate Tribunal is established and the appeal process can be initiated. They argue that invoking the bank guarantee prematurely would deny them the opportunity to exercise their right to appeal, thereby contravening principles of procedural fairness and equity.

The learned Senior Government Pleader argues that in order for the petitioner to pursue an appeal before the Appellate Tribunal as per Section 112 of the CGST/SGST Act, they are obligated to remit a sum equal to 20% of the tax amount in dispute. While acknowledging the petitioner’s plea for a directive preventing the invocation of the bank guarantee, it is contended that the petitioner should, at the very least, be required to deposit an amount equivalent to what they would have been mandated to deposit had the Appellate Tribunal been constituted.

After considering the arguments presented by both the counsel for the petitioner and the learned Senior Government Pleader representing the State, the Court opines that the provisions delineated in Section 112(8)(b) of the CGST/SGST Act necessitate the petitioner to furnish a deposit amounting to 20% of the tax amount in dispute as a prerequisite for maintaining an appeal before the Tribunal. Consequently, even in the absence of the Appellate Tribunal’s constitution, the petitioner is directed to deposit an amount equivalent to 20% of the tax amount in dispute to secure a stay on the invocation of the bank guarantee.

This decision underscores the Court’s adherence to statutory provisions and ensures that the petitioner complies with the requisite conditions for pursuing their appeal, thereby upholding the integrity of the legal process and the principles of procedural fairness.

In the conclusive disposition of this Writ Petition, the Court issues a directive stipulating that upon the petitioner remitting the requisite amount as per their obligations under Section 112(8)(b) of the CGST/SGST Act, necessary for the pursuit of an appeal before the Appellate Tribunal, any bank guarantee previously furnished by the petitioner in proceedings under Section 129 of the CGST/SGST Act shall not be subject to invocation. This injunction serves to safeguard the petitioner’s interests during the pendency of their appeal process.

Furthermore, the petitioner is instructed to maintain the validity of the bank guarantee, with a provision that should they fail to renew it within the stipulated timeframe, the concerned officer retains the prerogative to invoke the bank guarantee, notwithstanding the directives delineated in this judgment. However, the payment made by the petitioner is deemed as compliant with the provisions of Section 112(8)(b) of the CGST/SGST Act, obviating the need for any further deposit upon the constitution of the Tribunal for the continuation of their appeal.

The petitioner is mandated to effectuate the payment within a prescribed timeframe of two weeks from the date of receipt of a certified copy of this judgment, thereby ensuring expeditious compliance with the Court’s directives.

This judicial pronouncement harmonizes the petitioner’s procedural obligations with their entitlements, ensuring equitable treatment while upholding the statutory framework governing the appeal process. It serves to mitigate undue hardship for the petitioner while upholding the principles of procedural fairness and judicial integrity.

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