M/S Maa Karni Traders And Anr. vs. The Union Of INDIA And 3 Ors.

Held

The Court held that the conditions imposed by the GST authorities for the release of seized goods were in accordance with the law. Specifically, the Court found that the mandate of law, as reflected in Section 67(6) of the CGST Act, 2017, requires the owner of the goods to pay not only the value of the goods but also any penalty that may be payable as determined by the authorities, or to execute a bond with security. The Court reasoned that directing the applicants to execute a bond and furnish a Bank Guarantee for the amounts of tax and proposed penalty, as specified in the communication dated 17.03.2021, was within the purview of the law. The ratio decidendi is that statutory provisions governing the release of seized goods, including the payment of tax, interest, and penalty, must be complied with. The application was allowed, directing the applicants to execute a bond and furnish a Bank Guarantee for Rs. 3,36,750.00 (tax) and Rs. 3,36,750.00 (penalty), after which the goods would be released, subject to the final outcome of the writ petition.

Facts

The petitioners, M/s Maa Karni Traders and its proprietor, filed an interlocutory application seeking the release of seized goods. They argued that the authorities were imposing unreasonable conditions for release, specifically demanding payment of penalty in addition to the tax, even though the matter was not finally settled. The petitioners contended that the goods were legitimately obtained and not liable for penalty. The authorities, represented by the Standing Counsel, GST, countered that the requirement to pay penalty, along with tax and interest, or furnish a bond with security, was mandated by Section 67(6) of the Central Goods and Service Tax Act, 2017. They cited a Supreme Court judgment supporting compliance with statutory provisions for the release of seized goods.

Key Issues

1. Whether the condition imposed by the GST authorities for the release of seized goods, requiring payment of penalty in addition to applicable tax and interest, is in accordance with the provisions of the Central Goods and Service Tax Act, 2017, specifically Section 67(6)? The petitioners argued that the authorities were imposing unreasonable conditions by demanding payment of penalty before the final determination of their liability, asserting that the goods were legitimately obtained and not subject to penalty. They contended that such conditions amounted to an undue burden. The revenue, represented by the Standing Counsel, GST, argued that Section 67(6) of the CGST Act, 2017, explicitly permits the release of seized goods on a provisional basis upon execution of a bond and furnishing of security, or upon payment of applicable tax, interest, and penalty. They relied on the Supreme Court's decision in State of Uttar Pradesh and others Vs. Kay Pan Fragrance, which emphasized the necessity of complying with statutory provisions when ordering the release of seized goods.