Non-Renewal of GST Bank Guarantees: Bombay HC imposes Cost of Rs. 15 Lakh [Read Order]

The Bombay High Court has imposed a cost of Rs. 15 lakh due to the non-renewal of Goods and Services Tax (GST) bank guarantees.

The assessee has furnished a Bank Guarantee in all three Petitions for the release of goods. Therefore, to ascertain the status of these Bank Guarantees, these Petitions were listed for direction on 26th June 2024. In response to a query raised by the Court regarding the status of the Bank Guarantees, as recorded in the order dated 18th January 2022, information was provided to the State GST Authority – Respondent Nos. 2 and 3.

Mr. Patkar representing assessee informed the Court that the Bank Guarantees had already expired and they did not renew the same, nor the State GST Authority informed Petitioner about renewal. Further stated that the Bank that issued the Bank Guarantees has also returned the fixed deposit receipts that Petitioner had given as security for the issuance of the Bank Guarantees.

The bench expressed shock that respondent Nos.2 and 3 also did not insist upon renewal of these Bank Guarantees which would have resulted into a huge loss to the State GST Authority in case the stand of Revenue was upheld and if Revenue had to recover the penalty from Petitioner. It was not only the obligation of Petitioner but also duty of Respondent Nos.2 and 3 to have assured that the Bank Guarantees were kept alive till disposal of these Petitions.

The court therefore directed Respondent No.3 to conduct enquiry, fix the responsibility and take the action against the officers / staff who were responsible for allowing the Bank Guarantees to have lapsed. At the same time, Petitioner was also not justified in not renewing the Bank Guarantees, and therefore taking a firm view of such an inaction, the court deems if fit to impose cost of Rs.15 Lakhs (Rs.5, 00,000/- X 3) on assessee to be paid to the PM Cares Fund, within a period of four weeks from the date of uploading of this order and file affidavit of compliance.

The Coram of Justice Jithendra Jain and Justice K.R. Shriram also directed the assessee to deposit Rs. 75,000/- (Rs. 25,000/- x 3) with the State GST authority within a period of four weeks from the date of uploading of the present order, and the Bank Guarantee furnished, as recorded in the order dated 18th January 2022, would be returned by the Respondents to the assessee only upon payment of Rs. 75,000/- as directed herein.

To Read the full text of the Order CLICK HERE

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