DETENTION, SEIZURE AND RELEASE OF GOODS AND CONVEYANCE IN TRANSIT (PART 2)

Release of Goods on Payment of Penalty

In terms of section 129(1) of the CGST Act, 2017, any goods or conveyance detained as above can be released on payment of tax, interest and penalty leviable thereon or on furnishing of security equal to 110% of amount of tax, interest and penalty.

These are the provisions when an owner of the goods comes forward for payment of such tax and penalty.

However, in case owner of the goods does not come forward for release of goods and payment of such tax and penalty, the penalty equal to 50% of value of goods reduced by tax paid thereon. In case of exempted goods, penalty equal to 5% of value of goods or INR 25,000/- whichever is less.

However, in case of exempted goods it can be released on payment of 2% of value of goods or twenty-five thousand whichever is less.

Thus, in the following cases, goods and conveyance which have been detained can be released:

1. on payment of the applicable tax and penalty equal to 100% 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 twenty-five thousand rupees, whichever is less where the owner of the goods comes forward for payment of such tax and penalty;
2. on payment of the applicable tax and penalty equal to the fifty percent 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, where the owner of the goods does not come forward for payment of such tax and penalty;
3. upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed.

It may be noted that for the purpose of section 129(1), it is the duty of proper officer to determine the owner of the goods. Further, it is further clarified that since the tax has been paid late in contravention of the provisions of the CGST Act, a general penalty under section 125 of the CGST Act may be imposed after following the due process of law. In case of revision of prices, after the appointed date, of any goods or services supplied before the appointed day thereby requiring issuance of any supplementary invoice, debit note or credit note, the rate as per the provisions of the GST Acts would be applicable.

Consequences of Non-payment

Tax and penalty as prescribed in Section 129(1) shall be paid within 7 days of the date of detention to get the goods released.

Where the detained goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the proper officer may reduce the said time period to period less than 7 days.

As provided in section 129(6) of the GST Act 2017, in case owner of the goods fails to pay tax and penalty as determined within 7 days of such detention or seizure, further proceeding of confiscation of goods and conveyance would be initiated.

Changes in sub-section (4) of section 129

According to amendments made in sub-section (4) of section 129 by Finance Act, 2021 (w.e.f. 01.01.2022), following important changes have been made:

1. The time allowed for payment shall be 15 days from the date of receipt of copy of order issued under section 129(3) of CGST Act, 2017.
2. The payment of the amount shall be only for penalty.
3. In case of non-payment, the goods or conveyance detained / seized shall be liable to be sold or disposed off in prescribed manner so as to recover amount of penalty levied.
4. For release of conveyance, transporter is required to pay penalty levied or rupees 1 lakh, whichever is less
5. In case of perishable or hazardous goods or goods whose value may depreciate with time, proper officer may reduce the time limit of 15 days.

Principles of Natural Justice to be followed

As provided in section 129(4) of the CGST Act, 2017, no tax, interest or penalty can be determined in case of detention of goods and conveyance, without giving a show cause notice and without giving a reasonable opportunity of being heard.

It can therefore, be said that in order to release the goods / documents or conveyance the proper officer shall issue a notice specifying the tax payable and thereafter, pass an order for payment of tax and penalty as detailed above after giving reasonable opportunity of hearing to the concerned person.

According to amendments made in sub-section 14 of section 129 by Finance Act, 2021 (w.e.f. 01.01.2022), principles of natural justice have to be followed i.e. opportunity of being heard should be given before determining any penalty. Prior to 01.01.2022, this provision was applicable for levying tax, interest and penalty.

Release of Goods

The goods shall be released subject to following conditions of payment of tax or penalty and furnishing of security, as may be applicable:

Non-applicability of section 67 (w.e.f. 01.01.2022)

The Finance Act, 2021 has omitted sub-section (2) of section 129 which provided that section 67(6) shall mutatis mutandis shall apply for detention and seizure of goods and conveyance. This section deals with release of goods on provisional basis on execution of a bond and furnishing of security as prescribed or on payment of applicable tax, interest and penalty. In view of the amendment made by Finance Act, 2021, there will be no provisional release w.e.f. 01.01.2022 because sub-clause (2) of section 129 stands omitted.

Detention of Goods in Transit due to Under-valuation

Kerala State Government has issued a clarification vide Circular No. 6/2022 dated 06.04.2022 issued by Kerala State Commissioner of GST, Government of Kerala, clarifying on detention of goods in transit on the ground of undervaluation in compliance with Kerala High Court judgment in WP (C) No. 30798 of 2019 dated 18.11.2019. [ALFA GROUP Versus THE ASSISTANT STATE TAX OFFICER STATE GOODS AND SERVICE TAX DEPARTMENT, ALAPPUZHA, THE DEPUTY COMMISSIONER OF STATE TAX, ALAPPUZHA AND THE COMMERCIAL TAX OFFICER, STATE GOODS AND SERVICE TAX DEPARTMENT, ALAPPUZHA - 2019 (11) TMI 943 - KERALA HIGH COURT].

Kerala High Court had observed/held that:

• There is no provision under the GST Act that mandates that the goods shall not be sold at prices below the MRP declared thereon.
• The respondents cannot resort to arbitrary and statutorily unwarranted detention of goods in the course of transportation.
• The goods were ordered to be released to the petitioner forthwith.

In compliance of High Court judgment, Circular has directed that:

• Not to detain or issue any Show Cause Notice to the goods under transport or stored in parcel agencies, raising the sole reason for undervaluation of the goods compared to the Maximum Retail Price (MRP).
• If any undervaluation cases are suspected in such cases, the officers are directed to upload the details of such invoices using the option provided in the Mobile App and send a report to the jurisdictional Officer, marking a copy to the jurisdictional district Joint Commissioner.
• The intelligence squads shall gather evidence to establish the case by collecting documents about the actual value of the supply.
• The jurisdictional officer concerned shall verify the same with the help of the report and the uploaded details. Thereafter, the jurisdictional officer of the taxpayer vertical or the Intelligence formation can take further action as provided in the law.

Detention/Seizure/Release of Goods under Section 129 of GST law

Kerala State Government had issued instructions vide Circular No. 10/2022 dated 10.11.2022 issued by Commissioner State GST Department, Kerala, for release of goods /conveyance and right to appeal under section 107 of GST law. These instructions are outcome of Kerala High Court Order in Hindustan Steel And Cement, B.M. Steel Agencies Versus Assistant State Tax Officer, Kozhikode, Joint Commissioner Of State Tax Kozhikode, Joint Commissioner (Appeals, State Goods And Service Tax Kozhikode - 2022 (8) TMI 393 - KERALA HIGH COURT. Issuance of manual forms for detention, seizure and release of goods and conveyances under section 129 of the KSGST/CGST Act, 2017, may be avoided as far as possible.

Accordingly, in all cases of detention, seizure, and release of goods and conveyances in transit under Section 129 of the KSGST/CGST Act, 2017, final orders in FORM GST MOV -09 shall invariably be provided online, regardless of whether the party has made a voluntary payment of tax and penalty in FORM GST DRC-03.

In all previous instances where no final orders in FORM GST MOV -09 have been provided online and the taxpayer/party intends to file an appeal, FORM GST MOV-09 order shall be electronically issued immediately.

Protocol for Roving Squad for Levy of Penalties

Tamil Nadu Government had issued guidelines for booking of offences by Roving Squad Officers under the State GST law and also on levy of penalty of various types under GST laws. For this, Circular No. 10/2019 dated 31.05.2019 issued by Government of Tamil Nadu had been amended. The penalties have been made situation/ circumstances based for which guidelines may be referred.

Applicable Rules

The following Rules of CGST Rules, 2017 are relevant in relation to detention, seizure and release of goods viz-a-viz E-way bills:

(Concluded...)