Assessee was engaged in manufacturing sugar and rab jaggery. A search was conducted at the business and residential premises of partners and search and seizure was carried out under section 132, wherein, FDRs and cash along with 5,724 sugar bags were seized. Assessee wrote to AO for release of sugar bags being perishable items. Since, no action was taken by the AO, assessee approached the High Court which directed the authority concerned to pass appropriate orders for release of goods seized. The authority passed an order requiring assessee to furnish a bank guarantee of Rs 63.85 lacs to release stock of sugar. The AO passed an order under section 132(5) assessing the total tax liability including interest of Rs 164.84 lacs. The High Court held that since the tax liability was much more than the value of goods seized, it found no illegality in requiring assessee to furnish a bank guarantee for release of stock of sugar. Assessee furnished a bank guarantee of only Rs 40.20 lacs and the department released the stock of sugar but retained 1,200 sugar bags which was ultimately auctioned pursuant to the High Court order which had to be adjusted against the assessee’s tax liability. The department had to keep 1,200 sugar bags in a Central Warehouse and incurred charges of Rs 3.09 lacs. High Court  rejected the claim of the assessee for refund of Rs 3.09 lacs towards warehouse charges paid by the department as it was not the department which was at fault, rather it was the assessee itself for which the department cannot be penalized.

With regard to the second issue of granting interest from the date of seizure to the date of its actual payment, the High Court held that assessee could not claim interest on amount from date when goods were auctioned but the assessee was entitled to claim interest at 12% p.a. from the date of final order passed by the settlement commission (as settlement commission waived interest amount) till the date of actual payment. (WT No. 614 of 2016 dt. 17-07-2018)