SEIZURE OF GOODS AND CONVEYANCES -WHEN CAN BE DONE?

Chapter XIX of the Central Goods and Services Tax Act, 2027 (‘Act’ for short) provides for the offences and penalties from Section 122 to 138.  Different penalties are prescribed for contravention of the provisions of the Act and the rules made there under.  Section 129 provides penalty for detention, seizure and release of the goods whereas Section 130 provides the circumstances under which the goods in transit are confiscated for the contravention of the provisions of the Act.

Section 129 (1) of the Act provides for seizure of goods/detention of conveyances for the contravention of the provisions of the Act and Rules in relation to transport of goods.  The said sub section provides that 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.

Further the said section provides for the release of the seized goods under the following circumstances-

• 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 Rs.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 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;
• upon furnishing a security equivalent to the amount payable under the above clauses in such form and manner as may be prescribed;

Such goods or conveyance shall be detained or seized only after serving an order of detention or seizure on the person transporting the goods.  On payment of the penalty as discussed above, the procedure in respect of the notice shall be deemed to be concluded.

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, and thereafter, pass an order within a period of 7 days from the date of service of such notice, for payment of penalty.  No penalty shall be imposed without giving a reasonable opportunity of being heard to the tax payer.

If the owner of the goods or owner of the vehicle fails to pay the penalty as order within 15 days (lesser period if the goods are perishable in nature) from the date of passing the order of penalty the goods or conveyances are liable to be sold out to recover the penalty.    The conveyance shall be released on payment by the transporter of penalty imposed or Rs.1 lakh, whichever is less.

Section 130 of the Act provides for confiscation of goods or conveyances and ley penalty by the Authorities.  Section 130(1) of the Act provides that if any person-

• supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder 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 the rules made thereunder with intent to evade payment of tax; or
•  uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder 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 or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.  Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit.

No order confiscation of the goods/conveyances of imposing of penalties shall be passed without giving an opportunity of being heard. 

In M/s Srinivas Traders Versus The Assistant Commissioner Of State Tax and Others And M/s Srinivas Traders Versus The Dy Assistant Commissioner St Ii and Others - 2025 (5) TMI 1675 - ANDHRA PRADESH HIGH COURT the High Court held that action for confiscation can be done only on completing the procedure prevailing under Section 129 of the Act.

In the above said case, the goods of the petitioner had been seized by the Department, while in transit on 17.04.2025.   The Department seize the entire goods under Section 130 of the Act.  Against this order the petitioner filed a writ petition before the Andhra Pradesh High Court. 

The petitioner contended the following before the High Court-

• The Department did not give reasons for seizure of the goods of the petitioner while in transit.
• The respondent gave a printed proforma to the petitioner by ticking one of the printed reasons in the said form.
• The respondent did not give any further details.
• Without the same the petitioner could not file the reply to the respondent.
• Under Section 129 (3) of the Act the respondent was required to issue a notice within 7 days from the date of seizure calling upon the petitioner to attend the enquiry to ascertain the tax payable on such goods. 
• The Respondent, within 7 days from the date of receipt of reply, was required to complete the process for valuation and for determination of tax.
• The goods have been seized on 17.04.2025.  The respondent did not issue notice till date.
• The respondent, instead of completing the process under Section 129 had moved on to take up the process under Section 130 of the Act. 

The High Court considered the submissions of the petitioner.  The High Court observed that no documents have been produced by the respondent department that a show cause notice was issued under Section 129 of the Act.  The notices produced by the Department are the notices to be issued under Section 130 of the Act.  The Respondent produced before the High Court for the justification of taking action under Section 130 of the Act.  The High Court did not agree for the same.

Considering the facts of the case the High Court held that the procedure adopted by the respondent is against the provisions of the Act.  The High Court directed the concerned authorities, who had seized the goods of the petitioner, shall issue a notice under Section 129(3) of the Act within 2 days from the date of issue of the order.  Further the respondent is to ascertain the documents of the goods and tax, if any, payable on such goods and tax shall be determined within three days thereafter, after giving after issue of a notice and giving a reasonable opportunity of being heard.  After passing order under Section 130 of the Act the goods of the petitioner shall be returned to the petitioner after this process has been completed.

The High Court held that the action to be take by the Department is only to be taken after completing the procedure as contained in Section 129 of the Act.

The High Court further directed the Commissioners of the Department to sensitise their officers about the manner in which such confiscations are to be carried out.  For this purpose, the Commissioners are to conduct coaching classes, if necessary to train the officers to follow the law and procedure.