National Radio Electronics Corporation vs. State Tax Officer (Intelligence)

Facts

The petitioner, National Radio Electronics Corporation, challenged an order (Ext.P3) issued under Section 129 of the Central Goods and Service Tax Act, 2017. This order had detained goods and also invoked a bank guarantee furnished by the petitioner for the release of those goods. The petitioner contended that the statute allows a three-month period to prefer an appeal under Section 107 of the CGST Act, during which proceedings for invocation of the bank guarantee should be stayed. However, the respondents invoked the bank guarantee prematurely. The State Tax Officer (Intelligence), Squad No. III, was the authority that passed the order under challenge. The amount in dispute is not explicitly stated.

Held

The Court held that it was essential in the interests of justice to prevent the invocation of the bank guarantee until the period for filing the appeal expired. The Court noted that the order dated 20.12.2021 (Ext.P3) itself indicated the invocation of the bank guarantee along with the order under Section 129 of the CGST Act. The ratio of the decision is that the statutory period for preferring an appeal should be respected, and premature invocation of security measures like bank guarantees, which are intended to secure potential liabilities pending appellate remedies, is unjust. The Court directed the first respondent to withhold the invocation of the bank guarantee for a period of four months from 20.12.2021, allowing the petitioner to pursue their appellate remedy. The petitioner was also directed to keep the bank guarantee alive for the same period.

Key Issues

1. Whether the invocation of the bank guarantee by the respondent authority, prior to the expiry of the statutory period for filing an appeal under Section 107 of the CGST Act, is permissible under the law? Petitioner's arguments: The petitioner argued that Section 107 of the CGST Act provides a period of three months for preferring an appeal against an order. During this period, statutory provisions should stay any proceedings for the invocation of a bank guarantee. The premature invocation of the bank guarantee by the respondent, even before the appeal period expired, was therefore illegal. Revenue's arguments: The learned Government Pleader, on instructions, submitted that the bank guarantee had not, in fact, been invoked and that the proper officer had no intention of invoking it before the expiry of the appeal period. The judgment does not record any further arguments from the revenue.