RECOVERY OF PENALTY BY SALE OF GOODS OR CONVEYANCE DETAINED OR SEIZED IN TRANSIT

[Mr. M. GOVINDARAJAN]

Detention

Section 129 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides for the detention, seizure and release of goods and conveyances in transit.   Section 129(1) of the Act provides that where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of the Act or the rules made there under, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure.  No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

Order for payment of penalty

Section 129(3) of the Act provides that the proper officer detaining or seizing goods or conveyance shall issue a notice within 7 days of such detention or seizure, specifying the penalty payable. Thereafter, the proper officer shall pass an order within a period of 7days from the date of service of such notice, for payment of penalty. 

Release of goods

The goods and conveyances so detained or seized shall be released on payment of fine.  The rate of penalty  is enhanced with effect from 01.01.2022 vide Finance Act, 2021.  The goods and conveyances shall be released-

• on payment of penalty equal to 200% of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to 2% of the value of goods or ₹ 25,000/-, whichever is less, where the owner of the goods comes forward for payment of such penalty;
• on payment of penalty equal to 50% of the value of the goods or 200% of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to 5%  of the value of goods or ₹ 25,000/-, whichever is less, where the owner of the goods does not come forward for payment of such penalty;
• upon furnishing a security equivalent to the amount payable.

Conclusion of proceedings

If the registered person pays the penalty amount all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

Non-payment of penalty

Section 129(6) provides that where the person transporting any goods or the owner of such goods fails to pay the amount of penalty within fifteen days from the date of receipt of the copy of the order passed under, the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable.

The conveyance shall be released on payment by the transporter of penalty under sub-section (3) or ₹ 1 lakh, whichever is less.

Procedure for recovery of penalty

The procedure for recovery of penalty is prescribed in the newly inserted Rule 144A by Central Goods and Services Tax (Tenth Amendment) Rules, 2021 vide Notification No. 40/2021, dated 29.12.2021, with effect from 01.01.2022.  The following is the procedure-

• If the owner of the vehicle or the owner of goods fails to pay the penalty within 15 days from the date of order, the Proper Officer shall proceed or sale or disposal of the goods or conveyance so detained or seized by preparing an inventory and estimating the market value of such goods or conveyance.
• If the goods are hazarduous nature in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.
• The said goods or conveyance shall be sold through a process of auction, including e-auction, for which a notice shall be issued in Form GST DRC-10 clearly indicating the goods or conveyance to be sold and the purpose of sale.
•  If  the person transporting said goods or the owner of such goods pays the amount of penalty including any expenses incurred in safe custody and handling of such goods or conveyance, within 15 days from the date of order but before the issuance of notice in Form GST DRC - 10, the proper officer shall cancel the process of auction and release such goods or conveyance.
• The last day for submission of bid or the date of auction shall not be earlier than 15 days from the date of issue of the notice.
• If the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of 15 days may be reduced by the proper officer.
• The proper officer may specify the amount of pre-bid deposit to be furnished in the manner specified by such officer, to make the bidders eligible to participate in the auction.
• The pre deposit may be returned to the unsuccessful bidders, forfeited in case the successful bidder fails to make the payment of the full amount, as the case may be.
• The proper officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring him to make the payment within a period of 15 days from the date of auction.
• On payment of the full bid amount, the proper officer shall transfer the possession and ownership of the said goods or conveyance to the successful bidder and issue a certificate in Form GST DRC-12.
• The proper officer shall cancel the process and proceed for re-auction where no bid is received or the auction is considered to be non-competitive due to lack of adequate participation or due to low bids.
• Where an appeal has been filed by the person read with sub-section (6) of section 107, the proceedings for recovery of penalty by sale of goods or conveyance detained or seized in transit under this rule shall be deemed to be stayed.
• The amounts so realized from the sale of goods or conveyance, movable or immovable property, for the recovery of dues from a defaulter or for recovery of penalty payable under section 129(3) shall,-

• first, be appropriated against the administrative cost of the recovery process;
• next, be appropriated against the amount to be recovered or to the payment of the penalty;
• next, be appropriated against any other amount due from the defaulter under the Act or the Integrated Goods and Services Tax Act, 2017 or the Union Territory Goods and Services Tax Act, 2017 or any of the State Goods and Services Tax Act, 2017 and the rules made there under;
• the balance, if any, shall be credited to the electronic cash ledger of the owner of the goods or conveyance as the case may be, in case the person is registered under the Act, and where the said person is not required to be registered under the Act, the said amount shall be credited to the bank account of the person concerned.

• Where it is not possible to pay the balance of sale proceeds to the person concerned within a period of 6 months from the date of sale of such goods or conveyance or such further period as the proper officer may allow, such balance of sale proceeds shall be deposited with the Fund.