LM Wind Power Blades India Private Limited VS The State Of Maharashtra

The legal proceedings involve multiple parties and complex financial transactions. Mr. Tushar Jarwal represents the petitioner, while Mrs. S.D. Vyas serves as the learned Assistant Government Pleader for respondent Nos. 1, 3, and 4. Additionally, Mr. Jetly, accompanied by Mr. Mishra, appears as the senior counsel for respondent Nos. 2 to 5.

The petitioner initiates this legal action under Articles 226/227 of the Constitution of India, seeking a directive from the court to the respondents to reimburse an amount totaling Rs. 4,73,26,512.00, along with suitable interest. This demand stems from the cashing of eight bank guarantees issued by ICICI Bank on October 26, 2018, under the numbers 0005BG00008819, 0005BG00008919, 0005BG00009019, 0005BG00009119, 0005BG00009219, 0005BG00009319, 0005BG00009419, and 0005BG00009519, by respondent No. 4.

The petitioner, a dealer registered under the Central Goods and Services Tax Act, 2017 (referred to as “the CGST Act”), as well as the Karnataka Goods and Services Tax Act, 2017, operates as a private limited company specializing in supplying components to the wind energy sector. In a particular business transaction, the petitioner transferred capital goods, specifically blade moulds, from its Bangalore unit in Karnataka to its Halol unit in Gujarat, documented in a tax invoice dated August 5, 2018. Given that this was an interstate transaction, it incurred a tax liability. The invoice valued the goods at Rs. 13,14,62,520.00, with an integrated goods and service tax (IGST) of Rs. 2,36,63,256.00, calculated at the rate of 18%.

However, the transportation of these goods encountered a setback when four vehicles carrying them were stopped by respondent No. 4 on October 11, 2018, at Solapur in Maharashtra. Respondent No. 4 alleged discrepancies in the accompanying e-way bills, deeming them faulty and undervalued. Consequently, under Section 129 of the CGST Act, respondent No. 4 issued orders for the detention of the vehicles on October 17, 2018. Simultaneously, demand notices were served, also dated October 17, 2018, imposing IGST charges amounting to Rs. 59,15,814.00, alongside an equivalent penalty for each vehicle, thus totaling the IGST demand at Rs. 2,36,63,256.00, with corresponding penalty amounts.

This summary encapsulates the core contentions and legal actions undertaken by the involved parties, setting the stage for further legal deliberations and the court’s eventual judgment on the matter.

Following the detention of the goods, the petitioner acknowledged inadvertent clerical errors in the e-way bills, attributing them to oversight. Consequently, on October 29, 2018, the petitioner submitted a reply, admitting to the discrepancies and expressing willingness to pay the determined IGST while requesting respondent No. 4 to waive the penalty. In support of this, the petitioner provided four bonds dated October 26, 2018, accompanied by eight bank guarantees issued by ICICI Bank, each valued at Rs. 59,15,814.00, totaling Rs. 4,73,26,512.00, covering the entire IGST and penalty demand.

Respondent No. 4, in response, issued separate orders on October 29, 2018, releasing the detained goods. Additionally, identical orders were issued confirming the IGST and penalty amounts, directing the petitioner to make payment within seven days.

Acting in compliance, the petitioner paid the IGST of Rs. 2,36,63,256.00 on November 20, 2018, through self-assessment returns. Simultaneously, the petitioner lodged four appeals against the original orders dated October 29, 2018, before the appellate authority, the Deputy Commissioner of State Appeal, Solapur, under Section 107 of the CGST Act. As a prerequisite for filing the appeals, the petitioner deposited 10% of the IGST levied, amounting to Rs. 23,66,326.00, on January 29, 2019.

However, the appellate authority, in its orders dated March 26, 2019, dismissed the petitioner’s appeals and upheld the tax levy and penalty imposition. This series of events outlines the petitioner’s efforts to rectify the situation, including compliance with payment obligations and seeking redress through the appellate process, culminating in an unfavorable ruling from the appellate authority.

The petitioner, apprehending the encashment of the bank guarantees, took proactive steps by sending an email on March 28, 2019, to respondent No. 4, informing them of the intention to renew the bank guarantees. Additionally, the petitioner indicated that further appeals under Section 112 of the CGST Act were in progress and requested respondent No. 4 not to encash the bank guarantees.

Despite these communications, respondent No. 4 proceeded to encash all eight bank guarantees, totaling Rs. 4,73,26,512.00, on the very same day, March 28, 2019.

It’s noted that the appellate tribunal under Section 112 of the CGST Act has not yet been established in Maharashtra. Nevertheless, as a prerequisite for filing appeals, the petitioner made a pre-deposit payment of 20% of the IGST amount, totaling Rs. 47,32,651.00.

Given the absence of an appellate tribunal and aggrieved by the encashment of the bank guarantees, the petitioner has resorted to filing the present writ petition seeking relief.

In response, respondent No. 4, through an affidavit, justified the encashment of the bank guarantees. They highlighted that the bank guarantees had validity until March 31, 2019, and the petitioner was obligated to settle its liabilities before this expiration date. Since the liabilities remained outstanding until March 27, 2019, just before the bank guarantees were due to expire, respondent No. 4 deemed it necessary to enforce the guarantees. Furthermore, they argue that there was no prior notification of the petitioner’s intent to renew the guarantees before encashment occurred on March 28, 2019, whereas the partial payment under Section 112(8) of the CGST Act was made on March 29, 2019. Despite acknowledging that this payment would trigger automatic deemed stay under Section 112(9) of the CGST Act, they contend that it was ineffective due to the prior invocation of the bank guarantees.

This sequence of events sets the stage for the legal dispute between the petitioner and respondent No. 4 regarding the encashment of the bank guarantees and the subsequent legal actions taken by both parties.

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