Interim Bank Guarantee Securing Short-Paid Tax Need Not Be

Interim Bank Guarantee Securing Short-Paid Tax Need Not Be Enhanced to Cover Penalty for Perishable Goods Release

Issue

Whether an interim order directing a bank guarantee equivalent only to the alleged short-paid tax for releasing a perishable consignment should be modified to include the penalty amount.
Whether the authority before whom the interim bank guarantee is to be furnished can be changed to a different departmental officer (DGGI) upon the Revenue’s request.

Facts

A writ petition [WP(C)/318/2026] was filed challenging the detention/seizure of a consignment of perishable areca nuts and accompanying vehicles.
The Court passed an interim order directing the release of the seized goods and vehicles subject to the petitioner furnishing a bank guarantee equal to the alleged short-paid tax amount before Respondent No. 2.
The Directorate General of Goods and Services Tax Intelligence (DGGI) filed an interlocutory application seeking two modifications to the interim order:
1. Enhancing the bank guarantee amount to secure not just the tax, but also the penalty amount as per the departmental tabulation.
2. Changing the named authority for receiving the guarantee from Respondent No. 2 to Respondent No. 3 (Additional Director General, DGGI).
The writ petitioner opposed the enhancement, arguing that the penalty aspect was already considered by the Court when the initial interim order was formulated.

Decision

On Enhancement of Bank Guarantee (In favour of Assessee):
- The Court rejected the Revenue’s request to increase the guarantee amount to cover the penalty.
- It held that the primary purpose of the interim stage was to balance justice by securing the core alleged short-paid tax, especially considering the highly perishable nature of the areca nuts.
- The existing interim arrangement adequately protected the interests of justice, and no valid ground was established to alter the financial terms.
- The Court clarified that if the petitioner ultimately loses the main writ petition, the Department retains the right to enforce and recover the penalty at that later stage.
On Modification of the Receiving Authority (In favour of Revenue):
- The Court accepted the DGGI’s administrative request.
- The interim order was modified solely to the extent that the bank guarantee would now be furnished in the name of Respondent No. 3 (Additional Director General, DGGI) instead of Respondent No. 2.

Key Takeaways

Securing Tax over Penalty at Interim Stage: For the interim release of seized goods—particularly perishable commodities—securing the core alleged short-paid tax is generally deemed sufficient to protect Revenue interests without pre-emptively forcing a guarantee for penalties.
Preservation of Perishable Assets: Courts heavily weigh the perishable nature of cargo when balancing equities, preferring swift conditional releases over prolonged detentions that destroy commercial value.
No Prejudice to Final Adjudication: Refusing to secure a penalty via an interim bank guarantee does not wipe out the liability; the Revenue’s right to enforce statutory penalties remains fully preserved pending the final outcome of the writ petition.
Administrative Flexibility: Minor administrative modifications to interim orders, such as changing the specific departmental designation or officer in whose favor a security bond/guarantee is executed, are readily permitted to align with internal jurisdictional mandates.

HIGH COURT OF GAUHATI

Additional Director General of the Directorate General of GST Intelligence DGGI

Ms. Sarvadeva Vanijya (P.) Ltd.^*

Sanjay Kumar Medhi, J.

Case No. I.A.(Civil)/705/2026
WP(C)/318/2026

MARCH 12, 2026

S.C. Keyal and K. Jain, Advs. for the Petitioner. Dr. Ashok Saraf and P. Baruah, Advs. for the Respondent.

ORDER

1. Heard Shri SC Keyal, learned Senior Standing Counsel, DGGI for the applicant. Also heard Dr. A. Saraf, learned Senior Counsel assisted by Shri A. Kaushik and Shri B. Sarma, learned counsel for the opposite party / writ petitioner.

2. By the instant application, a prayer has been made for modification / alteration of the order dated 22.01.2026 passed in the connected writ petition being WP(C)/318/2026. By the aforesaid order dated 22.01.2026, this Court had passed an interim direction providing that subject to furnishing of adequate bank guarantee before the respondent no. 2 to cover the demand of tax short paid namely, Rs.2,26,038/- respectively for CGST and SGST totaling to Rs.4,52,076/- by the petitioner, the consignment of the areca nuts along with the vehicle Nos. WE65EB0086 and AS23BC9796 be released forthwith. The primary ground of filing this application is that while passing such interim order, the Court had taken into consideration only the amount of tax short paid and not the penalty involved.

3. By drawing the attention of this Court to the order dated 22.12.2025 issued by the Assistant Director, Shri Keyal, learned Standing Counsel has submitted that the same would indicate that there is a component of penalty and the total amount would be Rs.99,45,656/-. He accordingly submits that to balance the equities and secure the end of justice, the amount of the bank guarantee should be increased proportionately. He has submitted that in principle, he is not opposed to the aspect of releasing of the goods which are admittedly perishable in nature.

4. Dr. Saraf, learned Senior Counsel for the opposite party / writ petitioner has however submitted that while passing the interim direction on 22.01.2026, this Court was apprised of the penalty component which clearly appears from the communication dated 22.12.2025 (Annexure 10 of the writ petition). After such consideration, to secure the amount of tax involved, the present interim order has been passed directing furnishing of a bank guarantee of an amount equivalent to the tax allegedly short paid. He has also informed that in the pretext of filing the IA, the interim order which was passed inter-parte has not been complied with till date.

5. Upon hearing the learned counsel for the parties, this Court has observed that while passing the interim order dated 22.01.2026, this Court had taken into consideration the amount of tax short paid which is Rs.4,52,076/-. Though, this Court has also noted that Annexure 10 to the writ petition which contains the calculation in a tabular form also constitutes the penalty amount, in the considered opinion of this Court, the primary purpose is to secure the amount of tax short paid as alleged by the Department. Accordingly, this Court is of the opinion that the interest of justice has been taken into consideration and on being prima facie satisfied, the interim order has been passed, more so, when the goods involved are admittedly of perishable nature. This Court is accordingly of the opinion that no case for modification / alteration of the interim order is made out.

6. It is needless to state that that in the event the petitioner fails in the writ petition, the Department will have all the rights to enforce the penalty aspect.

7. At this stage, Shri Keyal, learned Senior Standing Counsel has submitted that the bank guarantee should be submitted before the respondent no. 3 -Additional Director General of the DGGI. The interim order dated 22.01.2026 is accordingly modified to the extent of the bank guarantee, as directed vide the order dated 22.01.2026 be furnished in the name of the respondent no. 3 instead of the respondent no. 2.

8. I.A. accordingly stands disposed of.