CONFISCATION UNDER MODEL GST LAW

[Mr. M. GOVINDARAJAN]

Introduction

In GST all the indirect taxes except customs are going to be subsumed.  The Central Excise Act and State VAT Acts deals with the levy of tax on goods.  Central Excise levies excise duty on the manufacture of goods and VAT Act levies tax on sales of goods.  Therefore there is the possibility of searching by the officers of concerned authorities to intervene in the transit of the goods.   If it is found there is any violation of the provisions of the Act or rules made there under then the officers concerned is empowered to seize the goods and on inquiry if it is confirmed the said goods may be confiscated.   Once the goods are confiscated they are vest in the respective Government.  Penal provisions will also attract for the same.

Provisions for seizure and confiscation in the Act

Section 90 of the Model Goods and Services Tax Act, 2016 (‘Act’ for short) provides for confiscation of goods and/or conveyances and levy of penalty.  Confiscation follows seizure.  Section 89 of the Act provides for detention, seizure and release of goods and conveyances in transit.

Detention or seizure of goods

Section 89(1) 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 rules made there under, all such goods and the conveyances used as a means of transport for carrying the said goods and documents relating to such goods and conveyances shall be liable to detention or seizure.

Release of seized goods

Section 89(1) provides that the seized goods shall be released-

• on payment of the applicable tax and penalty equal to 100% of the tax payable on such goods, where the owner of the goods comes forward for payment of such tax and penalty;
• on payment of the applicable tax and penalty equal to 50% of the value of the goods reduced by the tax amount paid thereon, where the owner of the goods does not come forward for payment of such tax and penalty;
• the proper officer detaining or seizing goods and/or conveyances shall issue a notice specifying the tax payable and thereafter, pass an order for payment of tax and penalty.

Discharge

Section 89(2) provides that on payment of the amount referred to in Section 89(1), all liabilities under Section 89 shall stand discharged in respect of such goods and such conveyance.

Confiscation

Section 90(1) provides that if any person-

• supplies or receives any goods in contravention of any of the provisions of this Act or rules made there under with intent to evade payment of tax; or
• does not account for any goods on which he is liable to pay tax under this Act; or
• supplies any goods liable to tax under this Act without having applied for registration; or
• contravenes any of the provisions of this Act or rules made there under with intent to evade payment of tax; or
• uses any conveyance as a means of transport for carriage of taxable goods in contravention of the provisions of this Act or rules made there under unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance,

then, all such goods and/or conveyance shall be liable to confiscation and the person shall be liability to penalty under Section 85.

Section 89(3) provides that where the person transporting any goods or, as the case may be, the owner of the goods fails to pay the amount of tax and penalty as provided in Section 89 (1) within 7 days of such detention, further proceedings shall be initiated in terms of Section 90 and Section 79 (6).    Where the detained goods are perishable or hazardous in nature or likely to depreciate in value with passage of time, the said period of 7 days may be reduced by the proper officer.

Provisional release of goods

Section 79 (6) provides for the provisional release of goods.  The said section provides that the goods seized shall be released on a provisional basis upon execution of a bond and furnishing a security, in such manner and of such quantum, respectively as may be prescribed or on payment of applicable tax, interest and penalty payable as the case may be.

Redemption fine

Section 90 (2) provides that whenever confiscation of any goods or conveyance is authorized by this Act, the CGST/SGST officer adjudging it shall give to the owner of the goods or, where such owner is not know, the person from whose possession or custody such goods have been seized or the owner or the person-in-charge of the conveyance, an option to pay in lieu of confiscation such fine as the said officer thinks fit.  Such fine shall not exceed the market value of the goods confiscated less the tax chargeable thereon.  The aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under Section 89(1) of the Act.  Where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation a fine equal to tax payable on the goods being transported thereon.

Section 90 (3) provides that where any redemption fine is imposed the owner of such goods or the person concerned shall, in addition, be liable to pay any tax and charges payable in respect of such goods.

Order of  confiscation          

Section 90(4) provides that no order of confiscation of goods and/or conveyance and/or imposition of penalty shall be issued without serving a notice on such person requiring him to show cause and without giving the person a reasonable opportunity of being heard.

Title of confiscated goods

Section 90(5) provides that where any goods and/or conveyance are confiscated under this Act, the title of such goods and/or conveyance shall thereupon vest in the appropriate Government.  The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding of such possession.

Disposal of confiscated goods

Section 90(7) provides that the proper officer may, after satisfying himself that the confiscated goods and conveyance are not required in any other proceedings under this Act and after giving reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose such goods and/or conveyances and deposit the sale proceeds thereof with the Government.

Confiscation not to interfere with other punishments

Section 91 provides that that no confiscation made or penalty imposed under the provisions of this Act or the rules made there under shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of this Act or under any other law.