Lm Wind Power Blades INDIA PVT. LTD. vs. State Of Maharashtra Through Secretary, Dept. Of Finance And Ors

Held

The Court directed the refund of the entire amount of Rs. 4,73,26,512.00 covered by the encashed bank guarantees, along with applicable statutory interest, to the petitioner within four weeks. Concurrently, the petitioner was directed to furnish fresh bank guarantee(s) from a nationalized bank to respondent No. 4 for an amount of Rs. 1,65,64,279.00, covering the balance amount of penalty imposed. The Court arrived at this decision by considering the total amount deposited by the petitioner, which included the IGST, 10% pre-deposit for the first appeal, and 20% pre-deposit for the second appeal, totaling Rs. 3,07,62,233.00. This amount, when added to the encashed bank guarantees, resulted in the respondents holding Rs. 7,80,88,745.00 against a total demand of Rs. 4,73,26,512.00. The Court noted that even if the petitioner's appeals were dismissed, they would owe only Rs. 1,65,64,279.00 more, and the respondents were holding a significantly larger excess amount. The Court did not delve into the controversy of whether the respondent received the request for extension before encashment, focusing instead on achieving a just outcome based on the financial position. The ratio decidendi is that authorities should not hold amounts significantly in excess of the disputed demand, especially when statutory pre-deposits have been made and further appeals are pending, even if bank guarantees were encashed.

Facts

The petitioner, LM Wind Power Blades India Pvt. Ltd., a supplier of components to the wind energy industry, was intercepted transporting capital goods from Karnataka to Gujarat. The respondent authorities (Respondent No. 4) found the e-way bills faulty and undervalued, leading to detention of goods and issuance of demand notices for IGST and penalty totaling Rs. 2,36,63,256.00 each, for four vehicles, amounting to a total demand of Rs. 4,73,26,512.00. The petitioner admitted clerical errors and furnished eight bank guarantees from ICICI Bank, totaling Rs. 4,73,26,512.00, to secure the release of goods and avoid penalty. The respondent authorities released the goods but confirmed the demand and penalty. The petitioner paid the IGST and 10% of the disputed amount as pre-deposit for the first appeal. The appeals were dismissed, and the petitioner then paid 20% of the disputed amount for the second appeal, as the appellate tribunal was not yet constituted. Despite the petitioner's request not to encash the bank guarantees and intimation of filing further appeals, the respondent authorities encashed all eight bank guarantees on March 28, 2019.

Key Issues

1. Whether the respondent authorities were justified in encashing the bank guarantees for Rs. 4,73,26,512.00 on March 28, 2019, despite the petitioner's intimation of filing further appeals and request for renewal of bank guarantees, considering the provisions of Section 112(9) of the CGST Act which deems recovery proceedings stayed upon payment of pre-deposit for the second appeal? (Mixed question of law and fact, turning on Section 112(9) of the CGST Act). Petitioner's arguments: The petitioner argued that the encashment was premature and unjust, especially since they were in the process of filing further appeals and had made the requisite pre-deposits. They contended that the respondent No. 4 was informed about the intention to renew the bank guarantees. They also argued that the total amount recovered (including pre-deposits) far exceeded the actual demand, making the encashment oppressive. Revenue's arguments: The respondent authorities argued that the bank guarantees had a validity until March 31, 2019, and the petitioner had not discharged their liabilities by March 27, 2019. They claimed they were not informed of the intention to renew the bank guarantees before encashment. They also stated that the pre-deposit under Section 112(8) was made on March 29, 2019, after the bank guarantees were already invoked on March 28, 2019, thus not making the deemed stay under Section 112(9) effective.