Understanding Detention, Seizure, and Confiscation of Goods in Transit Under GST

The Goods and Services Tax (GST) framework mandates that specific documents must accompany goods being transported. Failure to provide these necessary records can lead to the detention and potential confiscation of the goods.

Latest Updates

The Union Budget 2024 proposed modifications to section 17(5) of the CGST Act. This section addresses blocked credits. The amendment suggests removing references to sections 129 (detention, seizure, and release of goods and conveyances during transit) and 130 (confiscation of goods or conveyances and penalty imposition). This change will take effect once officially notified by the CBIC.

Monitoring Goods Movement

Any movement of goods by a registered individual that exceeds Rs 50,000 must include an e-way bill. Authorized officers, appointed by either the Central or State government, are empowered to stop and inspect goods in transit. The person operating the vehicle carrying goods valued over Rs. 50,000 is required to possess the stipulated documentation, which includes both an invoice and an e-way bill. Upon interception, the officer may inspect both the documents and the goods themselves.

Detention and Seizure of Goods

Distinguishing Between Detention, Seizure, and Confiscation

Detention

Not allowing access to the owner of the goods by a legal order/notice is called detention. However the ownership of goods still lies with the owner. It is issued when it is suspected that the goods are liable to confiscation.

Seizure

Seizure is taking over of actual possession of the goods by the department. This measure can only be executed after an inquiry or investigation confirms that the goods are indeed liable for confiscation.

Confiscation

Confiscation represents the final action, occurring after a proper adjudication process. Once goods are confiscated, both their ownership and physical possession are transferred from the original owner to the government authority.

Penalties for Seized Goods

When an individual transports goods in violation of the GST Act, the goods, associated documents, and the transporting vehicle can be seized. The release of these goods is contingent upon the payment of applicable tax and penalties. Two primary scenarios dictate the penalty structure:

<ul><li>If the owner steps forward: A penalty equivalent to 100% of the tax amount will be imposed.</li><li>If the owner does not step forward: A penalty amounting to 50% of the goods' value before tax will be charged.</li></ul>

For goods exempt from tax, the penalty is 2% (if owner comes forward) or 5% of value of goods (if owner does not come forward) OR Rs. 25,000—whichever is less. The table below illustrates the penalty calculation:

Particulars	When Owner Comes Forward	When Owner Does Not Come Forward
Value of goods	1,00,000	1,00,000
GST@18%	18,000	18,000
Penalty	18,000	50,000
Total Payment	36,000	68,000

This clearly shows that the penalty is substantially higher if the owner of the goods fails to present themselves. Alternatively, the person responsible can provide a security deposit equivalent to the payable amount.

Seizure Procedures for Goods in Transit

The detention or seizure of goods and conveyances is initiated by issuing an official order of detention to the person transporting the goods. Following detention, the tax officer will issue a notice detailing the tax due and subsequently pass an order for the payment of both tax and penalty.

The concerned party will be granted an opportunity to be heard. Upon payment of the tax and penalty, all liabilities associated with the detention will be resolved. If payment is not made within seven days, the goods will be confiscated. This seven-day period may be reduced for goods that are perishable or hazardous.

Confiscation under GST

Both the goods and the conveyance used for transport will be confiscated if an individual engages in any of the following actions:

<ul><li>Supplying or receiving goods in violation of GST provisions with the intent to evade tax.</li><li>Being unable to account for the presence of seized goods.</li><li>Supplying goods without obtaining registration, even if legally required to do so.</li><li>Breaching regulations specifically to evade tax.</li><li>Utilizing any conveyance or vehicle to transport goods in contravention of GST provisions.</li></ul>

However, a vehicle may not be confiscated if its owner can demonstrate that it was used without their knowledge. Penalties will also apply in each of these scenarios. Before proceeding with confiscation, the tax officer must offer the option of paying a fine instead.

Fine in Lieu of Confiscation

The minimum fine aligns with the penalties mentioned earlier: 100% of the tax if the owner steps forward, and 50% of the goods' value before tax if the owner does not. The maximum fine can be equal to the market value of the goods before tax. For the confiscation of a vehicle, the owner will be given the option to pay a fine equivalent to the tax payable on the goods. It is important to note that paying a fine in lieu of confiscation does not exempt the individual from other applicable penalties. Additional taxes, charges, and penalties will still be due even after this fine is paid.

Goods will not be confiscated without a show-cause notice and an opportunity for the owner to be heard. Once confiscated, the goods become the property of the government. A period of three months is allowed for the payment of the confiscation fine, after which the goods will be sold. Confiscation actions do not preclude other punishments under GST provisions, meaning all applicable penalties and prosecutions will still be enforced.

Further details are available on inspection, search, and seizure, prosecution, and arrest under GST.