M/S Palak Designer Diamond Jewllery vs. Union Of INDIA

Facts

The petitioner, M/s Palak Designer Diamond Jewellery, engaged in manufacturing jewellery, had its factory premises searched on January 11, 2018, under Section 67(2) of the CGST Act. Excess finished goods were seized. The petitioner requested provisional release, stating the goods belonged to principal suppliers. The seized goods were valued at Rs. 4,10,68,644/-. The petitioner claimed to have paid CGST and SGST and penalty under Section 74(5). On March 14/15, 2018, raw materials and finished goods were again seized. The petitioner again requested release, having paid GST and penalty. The petitioner argued that as a job worker, it was only liable for GST on job work charges. The seizure period was extended. The petitioner filed a writ petition seeking provisional release of the seized goods.

Held

The Court held that the respondents were empowered to provisionally release seized goods if the conditions of Section 67(6) of the CGST Act, read with Rule 140 of the CGST Rules, were met. It was an admitted position that the total tax payable on the seized goods, valued at Rs. 15,58,59,711/-, was Rs. 46,75,791/-. Adding 50% towards penalty, the total amount approximated Rs. 70 lakhs. The petitioner had already deposited Rs. 14,16,868/- by challan and reversed SGST credit of Rs. 7,90,793/-, totaling approximately Rs. 22 lakhs. The Court found that if the petitioner furnished a bank guarantee of Rs. 50 lakhs and a bond in FORM GST INS-04 for the value of the goods, the interest of justice would be served. The petition was partly allowed, directing the provisional release of seized goods upon execution of the bond and furnishing the bank guarantee.

Key Issues

1. Whether the seized goods are liable for provisional release under Section 67(6) of the CGST Act, 2017, read with Rule 140 of the CGST Rules, 2017, upon the petitioner furnishing a bond and security or paying applicable tax, interest, and penalty? Petitioner's arguments: The petitioner contended that it had paid appropriate amounts of CGST and SGST and penalty, and had credit in its electronic ledgers. It argued that it could also provide a bank guarantee or bond for the release of goods. The petitioner highlighted that the total tax payable on seized goods, as per the show cause notice, was Rs. 46,75,791/-, with a potential penalty of Rs. 23 lakhs, totaling approximately Rs. 70 lakhs. Given the payments already made and the credit available, a bank guarantee of Rs. 50 lakhs should suffice for provisional release. Revenue's arguments: The revenue submitted that the total proposed demand, as per the show cause notice, was around Rs. 13 crores. Therefore, if relief was granted, the petitioner should be directed to furnish a bank guarantee of at least Rs. 1 crore.