Facts of the Case

The petitioner, Sonotone Audio LLP, Mumbai, represented by its Director, filed this writ petition challenging Ext.P4, a show cause notice dated 12.9.2021 issued under Section 129(3) of the CGST Act in Form GST MOV-07, following an Order of Detention in Form GST MOV-06 of the same date. The consignment, covered by an invoice dated 7.9.2021 and e-way bill dated 8.9.2021, had been detained by the Assistant State Tax Officer, Squad No.II, Palakkad. The petitioner had submitted a reply to the notice on 20.9.2021, and the first respondent had issued a further communication on 28.9.2021. At the stage of admission of the writ petition, the Court had already directed the detained goods to be released on furnishing a bank guarantee, and the goods were released accordingly. The petitioner also relied on Circular No.64/38/2018-GST dated 14.9.2018 issued by the Ministry of Finance.

Issues Involved

  1. Whether the writ petition against the Section 129(3) show cause notice survived once the detained goods had already been released on furnishing a bank guarantee.
  2. Whether the petitioner should instead be relegated to the statutory remedy of appeal against any final order passed pursuant to the show cause notice.
  3. What protection, if any, should attach to the bank guarantee furnished by the petitioner pending the statutory appeal period.

Petitioner's Arguments

  • The goods had already been released pursuant to the Court's earlier interim direction on furnishing a bank guarantee.
  • In view of the release, the petitioner's appropriate remedy against any final order passed on the Ext.P4 show cause notice would be to proceed under the statutory appellate mechanism rather than continue with the writ.
  • The petitioner sought protection to ensure the bank guarantee furnished would not be invoked prematurely, before the statutory appeal period had run its course.

Respondent's Arguments

  • The Government Pleader appeared for the respondents; no separate contest is recorded, as the petitioner itself confirmed the goods stood released and proposed to pursue the statutory remedy, obviating any adversarial hearing on merits.

Court Order/Findings

  • Justice Bechu Kurian Thomas recorded that the detained goods had been released on furnishing a bank guarantee pursuant to the Court's earlier direction at admission.
  • The Court held that the petitioner's remedy, if final orders pursuant to the Ext.P4 notice have been issued, is to proceed in accordance with the Statute, i.e., by way of statutory appeal.
  • The liberty of the petitioner to pursue its statutory remedy was expressly reserved, and the writ petition was closed on that basis.
  • Significantly, the Court directed that the bank guarantee furnished by the petitioner shall not be invoked till the statutory period for filing the appeal expires.

Important Clarification

  • Once detained goods have been released on a bank guarantee pursuant to interim orders, a writ against the underlying Section 129(3) show cause notice need not be pursued further; the taxpayer is relegated to the statutory appellate remedy once a final order is passed.
  • Courts closing such writs on this basis will commonly protect the taxpayer's bank guarantee from invocation until the statutory limitation period for filing an appeal has run, preserving the taxpayer's position pending appeal.

Sections Involved

  • Section 129(3) of the CGST Act, 2017 — requires issuance of a notice specifying the tax and penalty payable before an order can be passed for release of detained goods and conveyance.
  • Form GST MOV-06 and MOV-07 — the prescribed order of detention and show cause notice respectively, forming Ext.P3 and Ext.P4 in the writ record.
  • Circular No.64/38/2018-GST dated 14.9.2018 — Ministry of Finance clarification relied upon by the petitioner concerning modalities of detention and release proceedings under Section 129.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee — the writ was closed without adjudicating the show cause notice on merits, but the petitioner secured protection of its bank guarantee until the statutory appeal period expires, along with express liberty to pursue that appellate remedy.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) No.24085 of 2021
  • Coram: Justice Bechu Kurian Thomas
  • Date of Judgment: 14 March 2022
  • Parties: Sonotone Audio LLP vs Assistant State Tax Officer and another

Link to Download the Order

Download the full order of the Kerala High Court in WP(C) No.24085 of 2021

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.