Demanding Bank Guarantee From Assessee to Grant GST Refund is Contrary to Law | HC

Case Details: Raj Kamal Cargo Movers v. Assistant Commissioner, Jaipur - [2024] 158 taxmann.com 252 (Rajasthan)

Judiciary and Counsel Details

• • Arun Bhansali & Ashutosh Kumar, JJ.
  • Vikram Kumar Gogra for the Petitioner.
  • Ayush Singh, Ajay Singh & Punit Singhvi for the Respondent.

Facts of the Case

In the present case, the petitioner filed a writ petition to challenge the order passed by the Assistant Commissioner demanding bank guarantee from the petitioner before allowing refund. It was submitted that the Assistant Commissioner passed original order and the same was set aside by the Appellate Authority and directed to provide solvent security. However, the Assistant Commissioner again demanded bank guarantee from the petitioner.

High Court Held

The Honorable High Court noted that the Assistant Commissioner, who had passed original order and ordered for refund, had been trying to somehow block the refund to be made to the petitioner. The Court further noted that once solvent security was provided by the petitioner, the Assistant Commissioner again, apparently not willing to refund the amount, had demanded bank guarantee from the petitioner.

The Court also noted that the indication made that the bank guarantee needs to be taken from the petitioner by way of solvent security by itself is contradictory inasmuch as the term ‘solvent security’ essentially means that the person who is providing the security should not have been declared bankrupt by the court and he has to produce documents to indicate that he owns some movable/immovable property, which is equivalent to the amount for which the said security is being provided.

However, the ‘bank guarantee’ is a guarantee given by the bank on behalf of the applicant to cover the payment obligation to a third party. Therefore, the Court held that the action of seeking bank guarantee from the petitioner was ex facie contrary to the directions of Appellate Authority and the same was liable to be set aside.