DETENTION, SEIZURE AND RELEASE OF GOODS AND CONVEYANCES IN TRANSIT

[Dr. Sanjiv Agarwal]

Statutory provision (Section 129)

Section 129 of CGST Act, 2017 provides for as under:

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, 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, shall be released—

(a)   on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

(b)   on payment of penalty equal to fifty percent of the value of the goods or two hundred per cent of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;

(c)   upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section 6 of section 67 shall mutatis mutandis apply for detention and seizure of goods and conveyances[vide Finance Act, 2021 - date yet to be notified].

(3)The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).

(4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), 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 under sub-section (3)[substituted vide Finance Act 2021-date yet to be notified].

Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:

Provided further that where 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 fifteen days may be reduced by the proper officer.

Section 129 deals with the provisions relating to detention, seizure, release of goods and conveyance while in transit for contravention of provision of GST law or rules. Since this is one of the penal provisions involving detention and seizure of goods and/or vehicle carrying such goods. It has been provided that no such action shall be taken without serving an order of detention or seizure on the person transporting the goods. This calls for adjudication before issuing the order.

Amendments made by Finance Act, 2021

The following amendments have been made by Finance Act, 2021, the effective date of which is 01.01.2022 (vide Notification No. 39/2021-CT dated 21.12.2021)

1. In sub-section (1), clause (a) and (b) have been substituted to change the penalties as aforesaid.

The earlier clauses (a) and (b) were as follows:—

  “(a)   on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

    (b)   on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty.”

2. Sub-section (2) which read as under has been omitted:

“(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.”

3. Sub-section (3) has been substituted. Prior to substitution, it read as under:—

“(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).”

4. In Sub-section (4), the words “no penalty” has been substituted for the words “no tax interest or penalty”.

5. Sub-section (6) has been substituted. Earlier, subsection read as under:—

“(6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1)within 141[fourteen days] of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided that where 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 seven days may be reduced by the proper officer.”

The objective of above amendments by Finance Act, 2021 is to delink the proceedings under that section relating to detention, seizure and release of goods and conveyances in transit, from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty.

All the above amendments have been notified w.e.f. 01.01.2022 (vide Notification No. 39/2021-CT dated 21.12.2021).

Issue of notice [Sub section (3)]

It is a prerequisite for the proper officer to issue notice if he intends to levy any penalty on the person transporting the goods. The following are the conditions for levying the penalty.

1. Notice shall be issued by proper officer
2. Such officer is a person who has detained or seized the goods or conveyance (vehicle)
3. Notice has to be issued within a period of seven days of detention/ seizure proposing levy of penalty.
4. The order shall be passed on such notice within a period of seven days of service of notice levying the penalty as per sub-section (1).

Principle of natural justice to be followed

Sub-section (4) provides that no penalty shall be levied without giving the person an opportunity of being heard. Since levy of penalty is a process of adjudication which requires quasi judicial powers to be exercised by the proper officer, it is mandatory for him to offer an opportunity so that the person whose goods/vehicle have been retained can defend himself.

Only penalty to be adjudicated

Sub-section (4) was amended by way of Finance Act, 2021 to the effect that the words ‘no tax, interest or penalty” has been substituted by the words ‘no penalty’. This implies that section 129(3) and (4) can be applied only for determining and levying of penalty.