Facts of the Case

The petitioner, VTS Steels, was subjected to proceedings under Section 129 of the CGST/SGST Act, 2017 in relation to detained goods and the conveyance transporting such goods.

The petitioner’s grievance before the Kerala High Court was that, despite its willingness to comply with the requirements of Section 129(1)(c) by furnishing the prescribed security through a bank guarantee, the first respondent was refusing to accept the bank guarantee and release the detained goods pending adjudication of the notice issued under Section 129.

The documents forming part of the proceedings included invoices dated 18 October 2022, corresponding e-way bills, Form GST MOV-02, Form GST MOV-04, revised Form GST MOV-02, revised Form GST MOV-04, Form GST MOV-06 relating to detention, and Form GST MOV-07 containing notice under Section 129(3) and calculation of tax and penalty.

The petitioner therefore approached the High Court seeking release of the goods and conveyance upon compliance with the statutory conditions prescribed under Section 129(1)(c).

Issues Involved

The principal issues before the Kerala High Court were:

  1. Whether the GST authorities could refuse to release detained goods and the conveyance when the petitioner was willing to comply with the conditions prescribed under Section 129(1)(c) of the CGST/SGST Act.
  2. Whether a bank guarantee furnished in compliance with Section 129(1)(c) should be accepted for securing release of the goods and conveyance pending finalisation of proceedings under Section 129.
  3. Whether protection should be granted against immediate invocation of the bank guarantee in the event of an adverse adjudication order, so as to enable the petitioner to approach the appellate authority for appropriate relief.

Petitioner’s Arguments

The petitioner contended that it was willing to comply with the statutory mechanism contained in Section 129(1)(c) of the CGST/SGST Act.

The petitioner’s specific grievance was that the first respondent was refusing to accept the bank guarantee and consequently refusing to release the goods, even though the petitioner was prepared to satisfy the conditions prescribed under the statute.

It was therefore submitted that continued detention of the goods and conveyance was not justified once the petitioner complied with the statutory conditions for release under Section 129(1)(c), particularly when adjudication of the notice was still pending.

Respondent’s Arguments

The judgment records that the Court heard the learned Government Pleader appearing for the respondents.

However, the judgment does not separately record any detailed counter-arguments or specific factual submissions advanced on behalf of the respondents. Therefore, no additional or inferred stand should be attributed to the respondents beyond what is expressly reflected in the judicial order.

Court Order / Findings

The Kerala High Court held that if the petitioner complies with the provisions of Section 129(1)(c), there is no reason for the first respondent to refuse release of the goods and conveyance pending finalisation of the proceedings initiated under Section 129.

Accordingly, the High Court disposed of the writ petition with a direction to the first respondent to:

Release the goods and conveyance in question without any further delay upon the petitioner complying with the conditions prescribed under Section 129(1)(c) of the CGST/SGST Act.

The Court further granted an important protective direction regarding the bank guarantee. It held that:

If the proceedings under Section 129 result in an adverse order against the petitioner, the bank guarantee furnished by the petitioner shall not be invoked for a period of thirty days from the date of the adverse order.

This thirty-day protection was granted to enable the petitioner to apply for appropriate relief before the appellate authority.

Important Clarification

The judgment is important for understanding the statutory release mechanism under Section 129. The Court did not terminate or quash the underlying Section 129 proceedings merely because the petitioner offered a bank guarantee.

Instead, the Court distinguished between:

  • release of the detained goods and conveyance upon statutory compliance, and
  • final adjudication of proceedings under Section 129.

Therefore, release of goods and conveyance does not by itself determine the final merits of the tax and penalty proceedings.

A further important clarification is that the Court expressly protected the petitioner against immediate invocation of the bank guarantee for thirty days from the date of an adverse order, thereby preserving a practical opportunity to seek appropriate appellate relief.

Sections Involved

Section 129 of the CGST/SGST Act, 2017

This provision deals with detention, seizure and release of goods and conveyances in transit in circumstances covered by the statutory provision.

Section 129(1)(c) of the CGST/SGST Act

This was the central provision involved in the case. The petitioner expressed willingness to comply with this provision, and the High Court held that upon such compliance there was no reason to refuse release of the goods and conveyance pending finalisation of the Section 129 proceedings.

Section 129(3) of the CGST/SGST Act

The record of the case included Form GST MOV-07 containing notice under Section 129(3) and calculation of tax and penalty.

Legal Significance of the Judgment

The decision establishes an important procedural principle in GST detention matters: where a taxable person complies with the statutory conditions prescribed under Section 129(1)(c), the authority should not continue to refuse release of the detained goods and conveyance merely because adjudication proceedings remain pending.

The ruling also demonstrates judicial protection of the taxpayer’s effective appellate remedy by restraining invocation of the bank guarantee for thirty days after an adverse order.

The case is particularly relevant in matters involving:

  • GST detention of goods in transit;
  • detention of conveyance;
  • Form GST MOV-06;
  • Form GST MOV-07;
  • notice under Section 129(3);
  • release of detained goods against security;
  • furnishing of bank guarantee;
  • pending adjudication under Section 129;
  • protection against immediate invocation of bank guarantee; and
  • opportunity to seek relief before the appellate authority.

Link to download the order -https://mytaxexpert.co.in/uploads/1783417286_1366compressed.pdf

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