Priya Soparkar 1 2 wp 6968-19 IN HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.6968 OF 2019 LM Wind Power Blades India Pvt. Ltd. Petitioner V/s. State of Maharashtra and ors. Respondents --- Mr.Tushar Jarwal, Mr.Rahul Sateeja, Mr.Deepak Thackur i/by M/s DMD Advocates, Advocates for Petitioner. Mr.V.A.Sonpal with Mrs.S.D.Vyas, B Panel AGP, Advocates for Respondent Nos.1,3 and 4. Mr.Pradeep S. Jetly, Senior Advocate with Mr.J.B.Mishra, Advocates for Respondent Nos.2 and 5. --- CORAM : UJJAL BHUYAN & ABHAY AHUJA, JJ. DATE : SEPTEMBER 15, 2020 P.C.(UJJAL BHUYAN, J.):- 1. Heard Mr.Tushar Jarwal, learned counsel for petitioner; Mrs.S.D.Vyas, learned AGP for respondent Nos.1, 3 and 4; and Mr.Jetly, learned senior counsel alongwith Mr. Mishra, learned counsel for respondent Nos.2 to 5. 2. By filing this petition under Articles 226/227 of Constitution of India, petitioner seeks direction to respondents to refund amount of Rs.4,73,26,512.00 alongwith appropriate interest following encashment of eight bank guarantees dated 26th October, 2018 bearing Nos. 0005BG00008819, 0005BG00008919, 0005BG00009019, 0005BG00009119, 0005BG00009219, 0005BG00009319, ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 2 2 wp 6968-19 0005BG00009419 and 0005BG00009519 of ICICI Bank by respondent No.4. 3. Case of petitioner is that it is dealer registered under Central Goods and Services Tax Act, 2017 (briefly CGST Act hereinafter) and Karnataka Goods and Services Tax Act, 2017. It is private limited company engaged in business of supplying components to wind energy industry. In course of its business petitioner had supplied capital goods i.e., blade moulds from its Bangalore unit in Karnataka to its Halol unit in Gujarat vide tax invoice dated 5th August, 2018. Being inter-state supply of goods, it was taxable transaction. Value of goods as per invoice was Rs.13,14,62,520.00 and integrated goods and service tax (IGST) payable thereon at rate of 18% was Rs.2,36,63,256.00. goods were being transported by four vehicles which were intercepted by respondent No.4 on 11 th October, 2018 at Solapur in State of Maharashtra. Taking view that e-way bills were faulty and undervalued, orders of detention were passed by respondent No.4 under Section 129 of CGST Act on 17 th October, 2018. Simultaneously, demand notices dated 17th October, 2018 were issued levying IGST of Rs.59,15,814.00 and equivalent amount of penalty for each of four vehicle, thus total IGST demand levied was Rs.2,36,63,256.00 and equivalent amount of penalty imposed. 4. Petitioner submitted reply on 29 th October, 2018 admitting that discrepancies in e-way bills were ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 3 2 wp 6968-19 inadvertent clerical errors due to oversight. Petitioner therefore stated that it would pay IGST as determined but requested respondent No.4 not to impose penalty. In this connection petitioner furnished four bonds dated 26 th October, 2018 alongwith eight bank guaranties of ICICI Bank bearing Nos. 0005BG00008819, 0005BG00008919, 0005BG00009019, 0005BG00009119, 0005BG00009219, 0005BG00009319, 0005BG00009419 and 0005BG00009519, all dated 26th October, 2018, each amounting to Rs.59,15,814.00. Thus, bank guarantees were for total amount of Rs.4,73,26,512.00 covering entire demand of IGST and penalty. 5. Pursuant thereto respondent No.4 passed separate orders dated 29th October, 2018 releasing detained goods. He also passed four separate but identical orders all dated 29th October, 2018 confirming entire amount of IGST levied and penalty imposed. Petitioner was directed to make payment within seven days. 6. Petitioner paid IGST amounting to Rs.2,36,63,256.00 on 20th November, 2018 under self assessment returns. At same time petitioner filed four appeals against original orders dated 29th October, 2018 before appellate authority i.e. Deputy Commissioner of State Appeal, Solapur under Section 107 of CGST Act. As pre-condition for filing appeals petitioner had to deposit 10% of IGST levied which amounted to Rs.23,66,326.00 on 29 th January, 2019. However, appellate authority vide orders ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 4 2 wp 6968-19 dated 26th March, 2019 dismissed appeals of petitioner and confirmed levy of tax and imposition of penalty. 7. Apprehending that bank guarantees would be encashed petitioner sent email dated 28th March, 2019 to respondent No.4 stating that bank guarantees would be renewed and that petitioner was in process of filing further appeals under Section 112 of CGST Act. It therefore requested respondent No.4 not to encash bank guarantees. 8. Notwithstanding same, respondent No.4 encashed all eight bank guarantees covering amount of Rs.4,73,26,512.00 on 28th March, 2019 itself. 9. It is stated that appellate tribunal under Section 112 of CGST Act has not yet been constituted in State of Maharashtra. However, as pre-condition for filing of appeals petitioner made payment of 20% of IGST amount as pre-deposit under Section 112(8) of CGST Act. This amount came to Rs.47,32,651.00. 10. Since no appellate tribunal under Section 112 of CGST Act has been constituted in State of Maharashtra and being aggrieved by encashment of bank guarantees as above, petitioner has approached this court by filing present writ petition seeking reliefs as indicated above. ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 5 2 wp 6968-19 11. Respondent No.4 in his affidavit has stated that when vehicle carrying taxable goods is detained under Section 129, owner of goods has option to either pay amount of tax in cash and equal amount of penalty or he can furnish bank guarantee for such amount to ensure that vehicle can continue its onward journey. Referring to bank guarantees furnished by petitioner it is stated that those had validity till 31st March, 2019. Petitioner was bound to discharge its liabilities before 31st March, 2019 and having not discharged same till 27th March, 2019 which was in immediate proximity to date of expiry of bank guarantees, respondent No.4 had no other option but to enforce bank guarantees. It is stated that respondents were not informed before encashing bank guarantees that petitioner intended to renew bank guarantees. Bank guarantees were encashed on 28th March, 2019, whereas part payment under Section 112(8) of CGST Act was made on 29th March, 2019. Though admitting that payment of said amount would lead to automatic deemed stay under Section 112(9) of CGST Act, it is however submitted that it was not effective since bank guarantees were already invoked. 12. Petitioner has filed rejoinder affidavit denying contentions of respondent No.4. It is reiterated that petitioner had informed respondent No.4 about its intention of renewal of bank guarantees. Petitioner has stated that as against total demand of Rs.4.73 crores (IGST + ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 6 2 wp 6968-19 penalty), respondents have recovered Rs.7.8 crores much more than demand. Even if appeals filed by petitioner under Section 112 of CGST Act are decided by appellate tribunal against it, still respondents would hold excess amount of Rs.3.3 crores which is highly unjust and oppressive. 13. On 10th July, 2019, this court had summed up grievance of petitioner while calling upon respondents to file affidavit. Order dated 10th July, 2019 reads as under :- 1) This petition under Article 226 of Constitution of India challenges action of respondents in encashing 8 bank guarantees on 29th March 2019 aggregating to Rs.4.72 crores. This encashment of bank guarantee was done consequent to order dated 26th March 2019 of Appellate Authority under Section 21 of Integrated Goods and Service Tax Act read with Section 107 of Maharashtra Goods and Service Tax Act, 2017. 2) grievance of petitioner is that order dated 26th March 2019 passed by Dy. Commissioner of Sales Tax is subject to further appeal to Goods Service Tax Appellate Tribunal (Tribunal). statute provide period of three months to aggrieved party to file appeal to Tribunal. Inspite of above and petitioners specific request not to encash bank guarantee as they are in process of preparing appeal from order dated 26 th March 2019 of Appellate Authority, 8 Bank Guarantee have been encashed. 3) This action of respondents is prima facie contrary to decision of this Court in Mahindra and Mahindra Ltd. vs. Union of India 59 ELT 505. 4) Mr. Sonpal, learned Special Counsel for respondents-State, seeks time to take instructions and file affidavit, if so required. At his request, petition is adjourned to 19 th July 2019 at 3.00 ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 7 2 wp 6968-19 p.m. Parties are put to notice that petition is likely to be disposed of finally on next date. 14. Thereafter, on 19th July, 2019, rule was issued with observation that since issue involved is within narrow compass, petition would be disposed of on next date failing which grant of interim relief would be considered. 15. On 10th January, 2020, this court noted grievance of petitioner, further recording submission of petitioner that petitioner was willing to secure respondent authorities for balance amount of Rs.1,65,64,279.00 on refund of amount covered by encashed bank guarantees. Court directed respondents to place on record amount which according to respondents is payable by petitioner in case petitioner fails in his challenge after deducting amounts paid by petitioner and after encashment of bank guarantees. Calculation sheet furnished by petitioner was taken on record. Order dated 10th January, 2020 is extracted hereunder:- Heard learned Counsel for parties. 2. learned Counsel for Petitioner submitted that according to Petitioner amounts now lying with Government by encashment or bank guarantee, tax paid voluntarily and pre-deposit for statutory appeals, is far in excess than amount Petitioner is liable to pay if he fails in all his challenges. According to Petitioner, amount with Government is Rs.7,80,88,745/- but amount payable to Respondent-authorities is Rs.1,65,64,279/- assuming Petitioner fails in ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 8 2 wp 6968-19 his challenges. He submits that Petitioner is willing to secure Respondent-authorities for this amount. He submits that he has to make this request in peculiar facts and circumstances that there is no appellate Tribunal currently functioning which can take up grievance of Petitioner on merits. Prima facie, we find request made by Petitioner as fair. 3. Considering fact that matter has been pending for some time and orders have been passed by this Court, we direct Respondents to place on record amount which according to Respondents is payable by Petitioner in case Petitioner fails in his challenge, after deducting amounts paid by Petitioner and after encashment of bank guarantee. 4. Place Petition on board under caption, For Directions on 21 January, 2020. By this date we expect positive statement from Respondents regarding above aspect. Petitioner has produced calculation sheet and states same will be furnished to Respondent-authorities for their reference. 16. On 30th January, 2020 it was noted by court that according to State Government of Maharashtra there are no dues payable by petitioner to State of Maharashtra. However, no response was filed by Central Government and so time was granted to Central Government to file response. 17. No response has been filed. 18. Learned counsel for petitioner submits that action of respondent No.4 in encashing bank guarantees without waiting for expiry of appeal period is wholly illegal and ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 9 2 wp 6968-19 should be declared as such by this court. He submits that respondent No.4 has appropriated amount much more than demand and penalty put together which is required to be refunded back to petitioner with applicable interest. Petitioner had paid IGST and thereafter 30% of said amount at two stages; firstly 10% while filing first appeals before first appellate authority and secondly, 20% at stage of filing further appeals before appellate tribunal under Section 112 of CGST Act and which unfortunately in State of Maharashtra has not yet been constituted. In light of above, he prays for return of amount covered by eight bank guarantees and further submitted that petitioner would secure interest of revenue by providing fresh bank guarantees to cover balance amount of penalty imposed. 19. Learned special counsel representing respondent Nos.1,3 and 4 submits that bank guarantees had to be invoked under special and compelling circumstances as validity of those were expiring on 31st March, 2019. above action was done bonafidely to protect interest of revenue. 20. Mr.Jetly submits that Central Government has no role to play in matter and no response is called for. 21. Submissions made by learned counsel for parties have been considered. ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 10 2 wp 6968-19 22. From pleadings and orders passed by this court controversy in this case has narrowed down considerably; rather it now lies within narrow compass. 23. Admittedly, there is IGST demand of Rs.2,36,63,256.00 with equal amount of penalty imposed, together total dues comes to Rs.4,73,26,512.00. 24. As against this, petitioner had paid IGST of Rs.2,36,63,256.00. At stage of preferring first appeals petitioner had deposited 10% of IGST dues amounting to Rs.23,66,326.00. Thereafter while filing second appeals under section 112 of CGST Act petitioner deposited Rs.47,32,651.00 being 20% of IGST dues. Thus, petitioner had deposited amount of Rs.70,98,977.00 (Rs.23,66,326.00 + Rs.47,32,651.00) in addition to IGST dues already deposited. In all petitioner has deposited Rs.3,07,62,233.00, break-up of which is as follows:- (I) IGST dues paid Rs.2,36,63,256.00 (ii) 10% of IGST dues paid at time of filing first appeals - Rs. 23,66,326.00 (iii) 20% of IGST dues paid at time of filing second appeals - Rs. 47,32,651.00 ----------------------------- Total - Rs.3,07,62,233.00 ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 11 2 wp 6968-19 25. amount covered by eight bank guarantees is Rs.4,73,26,512.00. If both figures are added i.e., amount covered by bank guarantees and dues paid by petitioner, amount would be Rs.7,80,88,745.00 (Rs.4,73,26,512.00 + Rs.3,07,62,233.00) which amount is now with respondents as against demand and penalty of Rs.4,73,26,512.00. From above, it is evident that amount of Rs.3,07,62,233.00 (Rs.7,80,88,745.00 - Rs.4,73,26,512.00) is lying in excess with respondents. Even if appeals filed by petitioner under section 112 of CGST Act are dismissed, petitioner would be required to pay further amount of Rs.1,65,64,279.00 only whereas respondents are holding onto amount of Rs.3,07,62,233.00 of petitioner much in excess of dues. 26. Section 107 of CGST Act provides for appeals to appellate authority. Sub-section (1) says that any person who is aggrieved by any decision or order passed under CGST Act may appeal to prescribed authority within three months from date on which impugned decision or order is communicated. Sub-section (6)(b) provides that no such appeal shall be filed unless appellant has paid sum equal to 10% of remaining amount of tax in dispute arising from impugned decision or order. There is provision for filing further appeal to appellate tribunal under Section 112. As per sub-section (1), any person who is aggrieved by order passed against him under Section 107 ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 12 2 wp 6968-19 or by revisional authority under Section 108 may prefer appeal to appellate tribunal against such order within three months from date on which order sought to be appealed against is communicated to aggrieved person. As per sub-section 8(b), no appeal shall be filed under sub- section (1) unless appellant has paid sum equal to 20% of remaining amount of tax in dispute, in addition to amount paid under sub-section (6) of Section 107. Sub- section (9) clarifies that when appellant pays pre- deposit as per sub-section (8), recovery proceedings for balance amount shall be deemed to be stayed till disposal of appeal. 27. Section 115 provides for payment of interest on refund of amount paid for admission of appeal. It say that where amount paid by appellant under sub-section (6) of Section 107 or sub-section (8) of Section 112 is required to be refunded consequent to any order of appellate authority or of appellate tribunal, interest at rate specified under Section 56 shall be payable in respect of such refund from date of payment of amount till date of refund of such amount. Reverting to Section 56, we find that this section deals with interest on delayed refunds. Section 54, more particularly sub-section (5) thereof, deals with refund of tax. Section 56 says that if any tax is ordered to be refunded under sub-section (5) of Section 54, interest at such rate not exceeding six percent as may be specified shall be payable in respect of such refund. ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 13 2 wp 6968-19 28. Though we have briefly referred to relevant provisions, it may not be necessary to dilate further on provisions as contours of lis has narrowed down considerably. 29. That being position and without entering into controversy as to whether respondent No.4 received request of petitioner for extension of bank guarantees before encashment, we are of view that having regard to facts and circumstances of case, following directions will meet ends of justice. 30. Accordingly, we direct as under :- a. Respondent Nos.3 and 4 shall refund amount of Rs.4,73,26,512.00 covered by eight encashed bank guarantees with applicable statutory interest thereon to petitioner within period of four weeks from date of receipt of copy of this order; b. Petitioner to furnish fresh bank guarantee(s) from nationalized bank to respondent No.4 for amount of Rs.1,65,64,279.00 covering balance amount of penalty imposed on petitioner within period of four weeks from date of receipt of copy of this order. 31. With above directions, writ petition is disposed of. However, there shall be no order as to cost. ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: Priya Soparkar 14 2 wp 6968-19 32. This order will be digitally signed by Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of digitally signed copy of this order. (ABHAY AHUJA, J.) (UJJAL BHUYAN, J.) . ::: Uploaded on - 22/09/2020 ::: Downloaded on - 12/03/2021 12:19:00 ::: LM Wind Power Blades India Pvt. Ltd. v. State of Maharashtra and or