TMI - Tax Management India. Com
Article Section

Home Articles Goods and Services Tax - GST Dr. Sanjiv Agarwal Experts This

CONFISCATION OF GOODS UNDER GST LAW

Submit New Article

Discuss this article

CONFISCATION OF GOODS UNDER GST LAW
Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
January 17, 2023
All Articles by: Dr. Sanjiv Agarwal       View Profile
  • Contents

Meaning of confiscation

The term ‘confiscate’ has not been defined under the GST Act. Dictionary meaning of the word ‘confiscate’ is to expropriate private property for public use without compensating the owner, to appropriate (private property) to the public treasury by way of penalty, to deprive of property as forfeited to the State.

Under the CGST Act, 2017, goods can be confiscated in certain circumstances as provided in section 130 of the CGST Act, 2017.

The consequences of confiscation are that the ownership in goods post confiscation does not remain with the owner of goods and it vests with the Government or any other person who has confiscated the goods.

Circumstances for confiscation and penalty

As per section 130 of the CGST Act, 2017, the goods are liable for confiscation and any person shall be liable to penalty in the following cases:

  1. On supply or receipt of goods in contravention of provisions of the Act or rules leading to evasion of tax.
  2. On not accounting for any goods which are liable to pay tax under the Act.
  3. On supply of goods liable for taxation under the Act, without having applied for registration.
  4. Contravention of any of the provisions of the Act or rules with an intention to evade payment of tax.
  5. Uses any conveyance or means of transport for carriage of goods in contravention of provisions of this Act or rules made thereunder, unless the owner proves that it was used without his knowledge or connivance.

Than all such goods or conveyances shall be liable for confiscation and person shall be liable for penalty under section 122 of the Act.

Based on above, the triggers for confiscation and the outcome can be summarized as follows:

Trigger Points

Outcome

Supply or receipt goods in contravention of the provisions of CGST Act or rules made thereunder

Resulting in actual evasion of tax

Not accounting for goods  in question

Carrying  liability for payment of tax

Supply of goods which is liable to tax

Without registration

Contravention of the provisions of CGST Act or rules made thereunder

With an intention to evade payment of tax

Use of conveyance as a means of transport for carrying of goods

In contravention of the provisions of CGST Act or rules made thereunder

Levy of fine and penalty

As per provisions of section 130(2) of the CGST Act, 2017, following actions will be considered by proper officer:

  1. The proper officer shall give an option to pay fine as determined by the officer, in lieu of confiscation to owner.
  2. Where any fine in lieu of confiscated goods is imposed, the fine shall not be more than the market value of goods.
  3. The aggregate of fine and penalty shall not be less than the amount of penalty leviable under section 129(1) of the CGST Act, 2017.
  4. In case of hired conveyance, the owner of conveyance shall be given an option to pay fine equal to tax payable on goods in lieu of confiscation of conveyance.

It may be noted that Finance Act, 2021, w.e.f. 01.01.2022, second proviso has been amended to imply that aggregate amount of fine and penalty leviable shall not be less than the penalty equal to 100% of the tax payable on such goods. Prior to 01.01.2022, the amount of penalty was as leviable under section 129(1) of the CGST Act, 2017.

Fine in lieu of confiscation

Section 130(3) provides that where any fine in lieu of confiscation is imposed, the owner of such goods or conveyance shall in addition be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

However, sub-section (3) stands omitted by Finance Act, 2021 w.e.f. 01.01.2022.

Services not covered

Section 130 deals with only goods and conveyance. Nowhere in the provision supply of service has been referred. Since services are not transported in conveyance and only goods are transported, Section 130 will not be invocable in case of services.

Manner of dealing with confiscated goods

How the goods or conveyance confiscated under section 130 have to be dealt with and the rights of owner have been provided with in sub-section 4 to 7 of section 130 of CGST Act, 2017.

Following have been provided in section 130(4) to 130(7) :

  1. The owner of the goods will be served with show cause notice and will be given an opportunity of being heard before confiscation is ordered or any penalty is levied.
  2. The title of confiscated goods vest in the Appropriate Government
  3. The proper officer will take possession of the confiscated goods and every officer of police shall assist him in doing so.
  4. In case proper officer is satisfied that the goods or conveyance are not required in any other proceedings under the Act and after giving reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose such goods or conveyance and deposit the amount with government.

The proper officer ordering confiscation shall take and hold possession of the things confiscated on behalf of the Government and every officer of police shall assist in taking such hold and possession. If the proper officer is satisfied that the confiscated goods/ conveyance are not required for any other proceedings under the Act, then he shall, after giving reasonable time not exceeding 3 months to pay fine in lieu of confiscation, dispose the goods and deposit the sale proceeds with the Government.

It may be noted that confiscation of conveyance has been held to be unsustainable where no notice was served [Refer: M/S LAKSHAY LOGISTICS VERSUS STATE OF GUJARAT - 2021 (1) TMI 99 - GUJARAT HIGH COURT]. Earlier Supreme Court in CHAGANLAL GAINMULL VERSUS COLLECTOR OF CENTRAL EXCISE - 1989 (11) TMI 59 - SUPREME COURT, held that if show cause notice for confiscation is not issued within six months, the person from whom goods are seized is entitled to their return even where no limitation is prescribed.

 

By: Dr. Sanjiv Agarwal - January 17, 2023

 

 

Discuss this article