M/S Maruti Castings vs. Union Of INDIA

Held

The Court held that while the pre-conditions for the release of seized goods under Section 67(6) of the CGST Act, 2017, read with Rule 140 of the CGST Rules, 2017, must be complied with, as affirmed by the Supreme Court in State of Uttar Pradesh and Others Versus Kay Pan Fragrance Private Limited, any amount already deposited by the appellant towards tax should be taken into consideration. The Court reasoned that ignoring the admitted deposit of Rs. 53,08,574/- would indeed lead to a contravention of the principle of not collecting more than what is demanded. Therefore, the Court modified the order of the learned Single Judge to the extent that the admitted deposit of Rs. 53,08,574/- shall be taken into consideration and adjusted against the bank guarantee amount. The required bank guarantee would thus be Rs. 1,51,80,118/- minus Rs. 53,08,574/-. The Court explicitly stated that no other relief was granted and that only the direction for adjustment of the deposited amount was decided, leaving other issues undecided.

Facts

The appellant, M/s Maruti Castings, filed a writ petition challenging the seizure of goods by GST authorities. An interim order was passed for the release of seized goods upon furnishing a surety bond. Subsequently, the respondents filed an application under Article 226(3) of the Constitution, leading to a modified interim order by the learned Single Judge. This modification required the appellant to furnish a bank guarantee equivalent to the value of the seized goods, in addition to a surety bond, as per Section 67(6) of the CGST Act, 2017, and Rule 140 of the CGST Rules, 2017. The appellant appealed this modified order, arguing that the requirement to furnish a bank guarantee of Rs. 1,51,80,118/- did not account for the Rs. 53,08,574/- already deposited by them, leading to an over-collection.

Key Issues

1. Whether the learned Single Judge erred in modifying the interim order by requiring a bank guarantee without considering the amount already deposited by the appellant, thereby potentially leading to collection of an amount exceeding the demand? Petitioner's arguments: The appellant contended that the learned Single Judge failed to consider their prima-facie case against the illegal seizure and that the requirement of a show cause notice under Sections 73 & 74 of the Act was not met. Crucially, they argued that any amount already deposited by them should be adjusted against the demanded bank guarantee of Rs. 1,51,80,118/-, as failing to do so would result in collecting more than what was demanded, given the admitted deposit of Rs. 53,08,574/- Revenue's arguments: The respondent-Union of India argued that the deposited amount of Rs. 53,08,574/- could not be adjusted against the bank guarantee requirement of Rs. 1,51,80,118/- due to specific legal pre-conditions for release under Section 67(6) of the Act and Rule 140 of the Rules. They relied on the Supreme Court decision in State of Uttar Pradesh and Others Versus Kay Pan Fragrance Private Limited. The respondents also submitted that the issue of adjustment was not raised before the learned Single Judge and was being raised for the first time in the intra-court appeal, and that such a prayer was contrary to the main relief sought in the writ petition.