Facts of the Case

M/s RR Metal Industries, a proprietorship in Ranga Reddy District, Telangana, challenged summons and search-and-seizure orders dated 10.06.2025 and 11.06.2025 passed by the Superintendent, Senior Intelligence Officer of Central Tax, alleging illegal availment of Input Tax Credit of around Rs. 21 crore under the CGST Act, 2017, in connection with an associated proprietor whose GST registration had earlier been conditionally revived by the Court. During the investigation, raw materials, finished goods, registers and documents were seized after the Firm failed to produce records in Form GST INS-02. An interim order dated 28.08.2025 permitted provisional release upon submission of a 'bond/bank guarantee,' and a dispute arose over whether both a bond and a bank guarantee, or either one, were required. The High Court of Telangana, comprising the Chief Justice and Justice G.M. Mohiuddin, clarified the position by order dated 16.06.2026.

Issues Involved

  1. Whether the expression 'bond/bank guarantee' used in the interim order required the petitioner to furnish both instruments, or only one of them, for provisional release of seized goods.
  2. What Section 67(6) of the CGST Act and Rule 140 of the CGST Rules actually mandate for provisional release of goods seized during a GST search.

Petitioner's Arguments

  • The interim order required only a bond or a bank guarantee, not both, to be furnished for provisional release of the seized goods, and having already furnished a bond in Form GST INS-04, no additional bank guarantee should be insisted upon.
  • The impugned seizure itself was without basis to form 'reasons to believe,' and despite the petitioner submitting relevant documents, no steps were taken to release the goods, bringing its business to a standstill.

Respondent's Arguments

  • Learned Senior Standing Counsel for CBIC submitted that a complete reading of Rule 140 leaves no doubt that both a bond equivalent to the value of the goods and a bank guarantee equivalent to the applicable tax, interest and penalty are required as security for provisional release.
  • It was submitted that the seizure followed the Firm's failure to produce documents amid an investigation into fake invoices used to accumulate and utilise ITC without actual supply of goods, causing loss to the exchequer, and that adjudication proceedings were yet to be initiated.

Court Order / Findings

  • Examining Section 67(6) of the CGST Act and Rule 140 of the CGST Rules, the Court noted that seized goods may be released provisionally '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 and penalty payable.'
  • The Court held that the Rule position leaves no room for doubt that an assessee must produce both the bond and the bank guarantee for provisional release of seized goods, and clarified its earlier interim order dated 28.08.2025 to that effect.
  • Since the petitioner had already furnished a bond in Form GST INS-04, it was directed that it may now seek release of the remaining seized goods by additionally furnishing a bank guarantee equivalent to the applicable tax, interest and penalty, as prescribed under Rule 140.
  • The writ petition was disposed of with this clarification, with no order as to costs.

Important Clarification

  • Provisional release of goods seized under Section 67 of the CGST Act requires the assessee to furnish both a bond (in Form GST INS-04, for the value of the goods) and a bank guarantee (for the applicable tax, interest and penalty) - the two requirements under Rule 140 are cumulative, not alternative.
  • Where an interim order uses ambiguous language such as 'bond/bank guarantee,' courts will resolve the ambiguity by reference to the plain text of Rule 140 rather than reading it as offering the assessee a choice.
  • Ongoing investigation into a large-scale ITC fraud does not, by itself, bar provisional release of seized goods once the statutorily prescribed security is furnished.

Sections Involved

  • Section 67(6), CGST Act, 2017 - provides for release of seized goods on a provisional basis upon execution of a bond and furnishing of security, or on payment of applicable tax, interest and penalty.
  • Rule 140, CGST Rules, 2017 - prescribes the bond (Form GST INS-04) and bank guarantee required for provisional release of seized goods.

Decision - In Favour of

Disposed of with directions, largely in favour of the department on the interpretive question. The Court held both a bond and a bank guarantee are mandatorily required, while providing the petitioner a clear path to seek provisional release of the balance goods on furnishing the additional security.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: WP No.17784 of 2025 (with connected W.P.No.22854 of 2024)
Coram: Hon'ble the Chief Justice Sri Aparesh Kumar Singh and Hon'ble Sri Justice G.M. Mohiuddin
Date of Decision: 16.06.2026

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