The court established that under Section 67(6) of the CGST Act, a bank guarantee is mandatory for the provisional release of seized goods.

JUDGMENT

The matter comes up on an application filed by the respondents No.1, 3, 4 & 5 under Article 226(3) of the Constitution of India seeking vacation of the interim order dated 21/5/2021.

By order dated 21/5/2021, a coordinate bench of this Court passed the following order:

"Learned counsel for the petitioner submits that a sum of Rs.50 lac has been recovered under duress from the petitioner without even issuing show cause notice treating it as under Section 74 of the CGST Act, 2017. Learned counsel submits that the goods which have been seized are all duly accounted for and the same could not have been seized. The entire seizure is illegal.

Learned counsel submits that he is ready to submit surety bond instead of asking for a Bank guarantee.

Issue notice of the writ petition as well as stay application, returnable within eight weeks.

In the meanwhile, the goods lying with the respondent/s shall be released subject to submitting a surety bond of the equivalent amount of the value of the goods by the petitioner. The petitioner shall not be insisted for submitting the Bank guarantee."

It is submitted by learned counsel for the respondents that the directions of the Court that the petitioner shall not be insisted for submitting the Bank guarantee is contrary to the provisions of Section 67(6) of the Central Goods & Services Tax Act, 2017 ('the Act') read with Rule 140 of the Central Goods & Services Tax Rules, 2017 ('the Rules').

It is submitted that provisions of Section 67 (6) envisage release of goods on provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, as may be prescribed, and as per Rule 140 of the Rules, the seized goods may be released on a provisional basis upon execution of a bond for the value of the goods and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest & penalty payable.

It is submitted that the petitioner filed an application (Annex.10) seeking release of goods as per the provisions of Section 67(6) of the Act and indicated that it was ready to comply with the procedure. Based on the said application (Annex.10), a communication dated 11/5/2021 (Annex.15) was issued indicating the requirement to furnish a bond of Rs.2,71,07,354/- and a security in the form of a bank guarantee of Rs.1,51,80,118/- as per Section 67(6) of the Act and Rule 140 of the Rules for provisional release of seized goods. It is submitted that the respondents have passed the order in terms of the relevant provisions, which cannot be faulted and, therefore, the direction to release the goods without insisting for submitting the bank guarantee deserves to be vacated.

Reliance was placed on State of U.P. & Ors. v. Kay Pan Fragrance Pvt. Ltd. : (2020) 5 SCC 811, M/s. Maa Karni Traders & Anr. v. Union of India & Ors. : I.A.(Civil)/977/2021 in WP (C) 1003/2021 passed by Gauhati High Court on 10/6/2021 and JVG Super Cargo Service Ltd. v. State Tax Officer : S.B.Civil Writ Petition No.2540/2020, decided on 29/6/2020.

Learned counsel for the petitioner made vehement submissions with reference to various provisions of the Act that the petitioner is a registered person under Section 25 of the Act and as such in the circumstances of petitioner's case, issues have to be dealt with under Section 35(6) of the Act read with Section 73 or 74 of the Act. Action of the respondents in resorting to Section 67(2) of the Act in seizing the goods is not valid and consequently provisions of Section 67(6) do not apply and, therefore, as the entire action of the respondents in seizing the goods of the petitioner itself is invalid, the interim order granted by the Court is justified and the same does not call for any vacation/modification.

It was sought to be emphasized by learned counsel that besides the fact that as the petitioner is a registered person, as such provisions of Section 35 (6) read with Sections 73 & 74 of the Act only are applicable, even Sect