Kerala High Court Stays DGGI order asking for Bank Guarantee As Security

Kerala High Court Stays DGGI order asking for Bank Guarantee As Security

The Kerala High Court on 24 March 2021, in the case titled Kerala Communicators Cable Ltd (Petitioner) v. The Additional Director General & Union of India (Respondents) put a stay on the order of the DGGI wherein it directed the petitioner to furnish a bank guarantee for ₹30 crore as a condition for the lifting of provisional attachment of bank account under Section 83 of the Central Goods & Service Tax Act (CGST Act).

The single-judge of the HC Justice AM Badar directed the petitioner to furnish an undertaking before the Court by way of an affidavit that it shall not alienate any of its fixed assets, plant, property, and equipment shown in the balance sheet till disposal of the instant petition.

The factual matrix of the case is that the respondents carried out an inspection under Section 67 of the CGST Act at the premises of the petitioner. It has resulted in the provisional attachment of the bank accounts of the petitioner.

The petitioner had challenged the attachment of his bank accounts pursuant to the powers conferred by Section 83 of the CGST Act. Through the Writ Petition, it was prayed by the petitioner to direct Respondent No. 1 to release the bank guarantee and bond executed by the petitioner.

During the pendency of the said Writ Petition, by order, the respondent had modified the provisional attachment of bank accounts by imposing various conditions.

The petitioner submitted that if the adjudication goes against the petitioner, then the petitioner can prefer an appeal under Section 107 of the Act and only 10 per cent of the disputed amount can be pre-deposited for filing such appeal and the demand is deemed to be stayed by deposit of this 10 per cent of the disputed amount.

The maximum deposit for filing such a statutory appeal is only ₹25 crore. The petitioner prayed before the Court that the direction to furnish the bank guarantee of approx. ₹30 crore which was the credit balance in his account as it would seriously affect his business and is contrary to the provisions prescribed for adjudicating the demand which can be made pursuant to the search affected under Section 67 of the CGST Act.

The HC held, "The order directing furnishing of the bank guarantee needs to be stayed till disposal of the writ petition, by directing the petitioner to execute the undertaking that he will not sell, alienate or dealt with any of his assets as seen from the balance sheet produced by him."