M/S A J Enterprises vs. Sri Ranganath

Sri. Aditya Vikram Bhat, learned Additional Government Advocate1 appearing for the appellant–State,

2 Learned AGA submits that, in view of sub-section (8) of Section 112 of the Act, the respondent is required to deposit the entire amount quantified under Section 130 of the Act for release of the goods. Learned AGA further submits that 2 the Act HC-KAR NC: 2026:KHC:1894-DB the impugned order directing release of the vehicle subject to furnishing of an indemnity bond for a sum of ₹2,00,000/- is not in accordance with law and that such an indemnity bond does not adequately safeguard the interests of the revenue.

Sri. Srikanth A., learned counsel appearing for the respondent, submits that the factual adjudication on the liability is pending consideration in the writ petition. Learned counsel submits that the impugned order directs release of the vehicle in respect of which a penalty of ₹6,01,304/- has been levied.

1 Learned counsel further submits that, had the respondent been afforded the statutory remedy of appeal under Section 112 of the Act, the requirement would have been to deposit 20% of the disputed tax in addition to the amount already deposited under sub-section (6) of Section 107 of the Act, while preferring an appeal before the First Appellate Authority. Hence, learned counsel submits that furnishing an indemnity bond for a sum of ₹2,00,000/- would sufficiently meet the requirement of sub-section (8) of Section 112 of the Act. HC-KAR NC: 2026:KHC:1894-DB

2 Learned counsel further submits that the Appellate Authorities, by failing to release the vehicle in compliance with the impugned order, have committed disobedience thereof and have, consequently, rendered themselves liable for contempt.

Considered the submissions of learned counsel for the parties and perused of the record.

The appellant passed an order under Section 130 of the Act dated 09.10.2024, quantifying the tax and penalty on the goods at ₹30,62,800/- and levying a sum of ₹6,01,304/- in respect of the vehicle involved. The said order was carried in appeal under Section 107 of the Act. The Appellate Authority, by order dated 28.11.2024, dismissed the appeal.

Against such order, Section 112 of the Act provides for an appeal to the Appellate Tribunal. It is submitted that the Appellate Tribunal has not been constituted and, therefore, the writ petition is maintainable. Any interim order passed by the learned Single Judge during the interregnum, pending the constitution of the Appellate Tribunal, ought to be in consonance with sub-section (8) of Section 112 of the Act. HC-KAR NC: 2026:KHC:1894-DB

Sub-section (8) of Section 112 mandates payment of 20% of the disputed tax in addition to the amount already deposited under sub-section (6) of Section 107 of the Act. Sub- section (6) of Section 107 mandates deposit of 10% of the disputed tax before the Appellate Authority for pursuing an appeal under the said provision. It is submitted that no such deposit was made in the appeal arising out of the order passed under Section 130 of the Act.

In view of sub-section (8) of Section 112 of the Act, the respondent is required to deposit 30% of the disputed amount. The dispute in the present case is confined to the release of the vehicle, in respect of which tax and penalty of ₹6,01,304/- have been levied.

The order of the learned Single Judge directing release of the vehicle in question, subject to the respondent furnishing an indemnity bond for a sum of ₹2,00,000/- with one surety for the like sum, is not in strict conformity with sub- section (8) of Section 112 of the Act. However, we notice that the amount of ₹2,00,000/- would substantially meet the HC-KAR NC: 2026:KHC:1894-DB requirement of 30% as contemplated under sub-section (8) of Section 112 of the Act.

Having regard to the pendency of the larger issue in the writ petition, we deem it appropriate to interfere with the interim order only to the limited extent of modifying the direction by requiring the respondent/petitioner to deposit a sum of ₹2,00,000/- before the Adjudicating Authority, while complying with the remaining conditions imposed by the learned Single Judge in the order dated 02.04.2025. 11. The Appellate Authorities are directed to release the vehicle within one week from the date of deposit of ₹2,00,000/- as directed above. The other conditions imposed by the learned Single Judge shall continue to operate till the disposal of the writ petition.

Insofar as the contempt petition alleging disobedience of the order dated 02.04.2025 is concerned, we notice that the direction for release of the vehicle was subject to the complainant executing an indemnity bond. Undisputedly, the complainant has not complied with the said condition. In HC-KAR NC: 2026:KHC:1894-DB the absence of compliance with the condition required to be fulfilled by the complainant himself, the contempt petition is misconceived at this stage.

In view of the order passed above modifying the order complained of, the contempt petition does not survive for further consideration. Accordingly, it stands disposed of.

Subject to the above observations and modification, the writ appeal also stands disposed of.