Kerala High Court Sets Aside Tax Dept.'s Direction To Encash Bank Guarantee

Kerala High Court Sets Aside Tax Dept.'s Direction To Encash Bank Guarantee

The Court noted the provisions Sections 78 and 107 of the GST Act and concluded that the petition deserved to be allowed

The Kerala High Court set aside the direction of the State Tax Officer to encash bank guarantee and to forward the amount under the bank guarantee by demand draft to him by relying on the provisions of Section 78 and 107 of the Goods and Service Tax Act.

A single-judge court of Justice A.M. Badar in the High Court of Kerala at Ernakulam dealt with this matter titled Varahamurthi Flexirub Industries Pvt Ltd v State Tax Officer Squad-VII And Anr.

The present petition was filed by the Petitioner – Company challenging the action of the Respondent – Authority in directing the Bank to invoke bank guarantee and to forward the demand draft of the value of the said bank guarantee to the Respondent – Authority itself.

The Petitioner submitted that the provisions of Section 107 of the Goods and Service Tax Act (GST Act) provide for pre-deposit and that Section 78 of the GST Act demonstrated that the Petitioner had a time of three months for depositing the amount as per the assessment. Due to the said provisions, the Petitioner contended that the direction to encash the bank guarantee and forward the demand draft of the value of the bank guarantee to the Respondent was illegal.

The Court noted the provisions Sections 78 and 107 of the GST Act and concluded that the petition deserved to be allowed.

Therefore, the said direction was set aside by directing the Bank not to comply with the directions of the Respondent – Authority to encash bank guarantee and to forward the amount under the bank guarantee by demand draft to the Respondent.