HC Refuses Higher Bank Guarantee for GST Penalty Claim

Case Details: Additional Director General of the Directorate General of GST Intelligence DGGI vs. Ms Sarvadeva Vanijya (P.) Ltd. [2026] 185 taxmann.com 433 (Gauhati)

Judiciary and Counsel Details

• Sanjay Kumar Medhi, J.
• S.C. Keyal & K. Jain, Advs. for the Petitioner.
• Dr Ashok Saraf & P. Baruah, Advs. for the Respondent.

Facts of the Case

The petitioner was engaged in a dispute arising from proceedings initiated by the Directorate General of GST Intelligence (DGGI) concerning alleged short payment of tax on consignments of perishable areca nuts and associated vehicles. An interim order had been passed directing the release of the detained goods upon furnishing of a bank guarantee equivalent to the amount of alleged short-paid tax. The DGGI subsequently filed an interlocutory application seeking to modify the interim order to increase the bank guarantee. It was contended that the question of penalty had already been considered at the stage of passing the interim order and that no further enhancement was warranted. It was further submitted that the interim arrangement was limited to securing the alleged tax liability and should not be expanded to include penalty at this stage. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the interim order had been consciously passed taking into account the requirement of securing the alleged short-paid tax in respect of perishable goods, where immediate release was necessary to prevent deterioration. The departmental tabulation included a penalty component; the primary objective at the interim stage was to safeguard the tax demand under Section 73 of the CGST Act and the Assam GST Act. It was observed that the interim arrangement protected the revenue’s interests without extending the scope to penalty security. It was clarified that the Department’s right to enforce a penalty remained fully preserved. Accordingly, the Court found no justification for modifying or enhancing the bank guarantee and rejected the request for alteration of the interim order, while permitting substitution of the beneficiary of the bank guarantee.