GST Detention Case: Delhi HC Orders Release of Truck & Goods on Bank Guarantee

Get the full picture - access the original judgement of the court order here

Case Name

Brij Gopal Gupta v. Government of NCT of Delhi & Ors.

Court Name: High Court of Delhi at New Delhi

Case No.: W.P.(C) 185/2020

Decision on: 15th January 2020

Key Takeaways

1. GST Appellate Tribunal was non-functional at the time, which is why the petitioner had to approach the High Court directly via a writ petition instead of the normal appellate route.

2. Section 129(1)© of the CGST Act provides a relief mechanism — detained goods and conveyance can be released if the person furnishes a security equivalent to the tax and penalty amount. The court applied this provision.

3. The court directed release of the vehicle upon furnishing a bank guarantee of ₹7,30,782/- covering penalty under CGST Act, DGST Act, and Cess.

4. The petitioner was also required to prove that tax on the goods had already been paid by the suppliers, by submitting monthly GST returns.

5. If tax was found to be unpaid, the petitioner would need to provide an additional bank guarantee for the tax amount as well.

Issue

The central legal question here is:

Can a transporter get his detained vehicle and goods released when the GST Appellate Tribunal is non-functional, and if so, on what conditions?

More specifically:

• Was the detention of the vehicle and goods by GST authorities valid?
• Can the petitioner seek relief directly from the High Court given the non-functionality of the GST Appellate Tribunal?
• Should the vehicle and goods be released, and if yes, on what terms?

Facts

• 5th August 2019: A vehicle bearing registration number HR-38-W-5315 was detained by the State GST authorities (Ward 74) along with the goods it was carrying.

• The Proper Officer, State GST, Ward 74 passed an order of demand of tax and penalty against the petitioner.

• The petitioner challenged this before the Appellate Authority, Delhi, GST, which passed an order on 2nd December 2019 — presumably not in the petitioner’s favour.

• Normally, the next step would be to approach the GST Appellate Tribunal. However, the Tribunal was non-functional because the Delhi High Court itself had stayed its functioning via an order dated 19th November 2019 in the case of Bharatiya Vitta Salahkar Samiti & Anr. v. UOI and Ors. (W.P.© 6900/2018).

• With no Tribunal available, the petitioner filed this Writ Petition (W.P.© 185/2020) before the Delhi High Court on 15th January 2020, seeking release of his vehicle and goods.

• The petitioner’s key argument was that the tax on the goods had already been paid by the respective suppliers, and he was merely the transporter — not the seller or buyer.

Arguments

Petitioner’s Side (Brij Gopal Gupta):

1. Tax already paid: The tax on the goods being transported had already been paid by the respective suppliers. The petitioner was just the transporter and should not be penalised for something the suppliers had already complied with.

2. Legal right to release under Section 129(1)© of the CGST Act: This provision allows for the release of detained goods and conveyance upon furnishing a security equivalent to the tax and penalty amount. The petitioner was willing to comply with this.

3. No alternative remedy: Since the GST Appellate Tribunal was non-functional, the petitioner had no choice but to approach the High Court directly.

Respondents’ Side (Government of NCT of Delhi & Ors.):

The judgment is an interim order and does not elaborate on the respondents’ detailed arguments. The respondents’ counsel accepted notice and was directed to file a counter-affidavit within six weeks.

Key Legal Precedents & Provisions

1. Section 129(1)(C) of the CGST Act

This is the most critical legal provision cited in this case. It allows for the release of seized/detained goods and conveyance upon the person furnishing a security equivalent to the amount payable towards tax and penalty. The court directly applied this provision to direct the release of the vehicle and goods.

2. Bharatiya Vitta Salahkar Samiti & Anr. v. UOI and Ors. — W.P.(C) 6900/2018

This is the case in which the Delhi High Court had earlier (on 19th November 2019) stayed the functioning of the GST Appellate Tribunal. This stay is the reason why the petitioner could not pursue the normal appellate remedy and had to come directly to the High Court.

3. DGST Act (Delhi Goods and Services Tax Act)

The penalty amount of ₹7,30,782/- was calculated as a combined figure under the CGST Act, DGST Act, and Cess. The DGST Act is the Delhi state counterpart of the central CGST Act.

Judgement

The Delhi High Court ruled in favour of the petitioner (partially, at this interim stage) and passed the following directions:

1. Issue of Notice: The court issued notice to the respondents and asked them to file a counter-affidavit within six weeks.

2. Release of Vehicle and Goods: The court directed the respondents to release the vehicle (HR-38-W-5315) along with the goods, subject to the petitioner furnishing a bank guarantee of ₹7,30,782/- (covering penalty under CGST Act, DGST Act, and Cess).

3. Proof of Tax Payment: The petitioner was directed to provide monthly GST returns as proof that the tax on the transported goods had already been paid by the suppliers.

4. Additional Bank Guarantee if Tax Unpaid: If it turns out that the tax was not paid, the petitioner must also provide a bank guarantee for the tax amount.

5. Timeline: The bank guarantee was to be provided within two weeks, after which the vehicle and goods were to be released without any further delay.

6. Next Date: The matter was listed for further hearing on 13th August 2020.

Note: This is an interim order, not a final judgment. The case was still ongoing, and the court was yet to hear the full merits of the case.

FAQs

Q1: Why did the petitioner go to the High Court instead of the GST Appellate Tribunal?

Because the GST Appellate Tribunal was non-functional at the time — it had been stayed by the Delhi High Court itself in an earlier case (Bharatiya Vitta Salahkar Samiti & Anr. v. UOI and Ors.). So the petitioner had no other option but to approach the High Court directly.

Q2: What is Section 129(1)© of the CGST Act, and why is it important here?

Section 129(1)(C) of the CGST Act allows a person whose goods and conveyance have been detained/seized to get them released by furnishing a security (like a bank guarantee) equivalent to the tax and penalty amount. This provision was the legal basis for the court’s order to release the vehicle and goods.

Q3: Did the petitioner have to pay the full tax and penalty to get the vehicle released?

No! That’s the beauty of Section 129(1)©. The petitioner only had to provide a bank guarantee (not actual cash payment) for the penalty amount of ₹7,30,782/-. If tax was already paid by the suppliers, no additional guarantee was needed for tax.

Q4: What happens if the tax on the goods was NOT paid by the suppliers?

In that case, the petitioner would also need to furnish an additional bank guarantee for the tax amount — not just the penalty.

Q5: Is this a final decision in the case?

No, this is an interim order passed on 15th January 2020. The case was listed for further hearing on 13th August 2020. The court had only directed the release of the vehicle at this stage; the full merits of the case were yet to be decided.

Q6: What was the total penalty amount the petitioner had to secure?

The total bank guarantee amount was ₹7,30,782/-, covering penalties under the CGST Act, DGST Act, and Cess combined.

Q7: Who were the judges in this case?

The bench consisted of Hon’ble Mr. Justice Vipin Sanghi and Hon’ble Mr. Justice Sanjeev Narula of the Delhi High Court.

1. Issue Notice. Learned counsel for the respondent accepts notice. Counter

affidavit be filed within six weeks. Rejoinder thereto, if any, be filed before the next date.

2. Since the appellate tribunal of GST is presently non-functional on account of the stay granted by this Court vide order dated 19.11.2019 in Bharatiya Vitta Salahkar Samiti & Anr. v. UOI and Ors. bearing number W.P.(C) 6900/2018, the petitioner has preferred the present writ petition to assail the order dated 02.12.2019 passed by the Appellate Authority, Delhi, GST as well as the order of demand of tax and penalty, passed by Proper Officer, State GST, Ward 74 with a prayer for release of conveyance bearing

registration No. HR-38-W-5315 and goods contained therein, that were

detained by the respondent on 05.08.2019.

3. The submission of learned counsel for the petitioner is that the tax in

respect of the goods carried in the aforesaid conveyance already stands paid

by the respective suppliers and that the petitioner was only transporting the goods. He has also drawn our attention to Section 129 (1) (c) of the CGST Act, which permits the release of the seized goods and conveyance upon

furnishing a security equivalent to the amount payable towards tax and

penalty. We, therefore, direct the respondents to release the vehicle aforesaid along with the goods, upon the petitioner furnishing a bank guarantee for the penalty amount under the CGST Act , DGST Act and Cess, totalling to Rs. 7,30,782/-

4. The petitioner shall also provide requisite proof in the form of monthly

returns to establish that the tax on the goods in question, being transported, stands paid. In case, the tax in respect of the said goods has not been paid, the petitioner shall provide bank guarantee in respect of the amount of tax as well. The bank guarantee shall be provided within two weeks for today to the respondents, whereafter, the vehicle and the goods shall be released without any further delay.

5. List on 13.08.2020.

VIPIN SANGHI, J

SANJEEV NARULA, J

JANUARY 15, 2020