Confiscation of goods and conveyance where the concerned person has not complied with the order of proper officer pronounced under sub-section (3) of section 129 of the CGST Act , 2017 ( similar provisions are embodied in UPGST Act , 2017 ) is an innovative concept of GST Regime and such proceedings should be carried out according to the requisite provisions embodied in the Act and rules made thereunder . It is also significant to note that the GST laws not only envisage the provisions relating to confiscation of goods or conveyance in the aforesaid scenario but also provide provisions to levy penalty and fine in such circumstances .

It is significant to note that sub-section (6) of section 129 clearly envisages that 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 fourteen days of such detention or seizure  , further proceedings shall be initiated in accordance with the provisions of section 130 of the Act. It also clarifies that where the detained or seized goods are of perishable or hazardous nature or are likely to depreciate in value with passage of time , the proper officer may reduce the said period of fourteen days . It should be remembered that the time period as provided under sub-section (6) of section 129 was earlier seven days but it has been amended to fourteen days by the Act No. 31 of 2018 which has been enforced w.e.f. 1st February , 2019 by Notification No. 02 of 2019 –Central Tax Dated 29th January , 2019 .

Thus the provisions contained in section 130 of the Act need a very careful study in respect of confiscation of goods and further levying of penalty or fine .  It is pertinent to note that section 130 of the CGST Act , 2017 ( hereinafter referred to as the Act )          ( similar provisions are embodied in UPGST Act , 2017 ) envisages following  provisions :

“130 .Confiscation of goods or conveyances and levy of penalty :

(1) Notwithstanding anything contained in this Act, if any person –

(i) 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

(ii) does not account for any goods on which he is liable to pay tax under this   Act; or

(iii) supplies any goods liable to tax under this Act without having applied for registration; or

(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or

(v) 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.

(2) 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:

Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon:

Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129:

Provided also that 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 of the conveyance a fine equal to the tax payable on the goods being transported thereon.

(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

(4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard. 

(5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government.

(6) 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 such possession.

(7) The proper officer may, after satisfying himself that the confiscated goods or 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 off such goods or conveyance and deposit the sale proceeds thereof with the Government.”

It is significant to note that sub-section (1) of this section describes the circumstances  in which confiscation of goods and conveyance is to be made . Clause (i) to (iv) of this sub-section relate to goods and sub-section (v) relates to conveyance . This section starts with the non-obstante expression i.e. ” Notwithstanding anything contained in this Act ” this means that the provisions of this section will override any other related provisions embodied in the Act . Thus although sub-section (6) of section 129 envisages that if the concerned person fails to comply with the order under sub-section (3) of section 129 within the stipulated time , the proceedings of confiscation and penalty shall be carried out under section 130 , yet it will be a legal requisite to ensure that such case falls under the provisions embodied in any of the clauses (i) to (iv) in respect of such goods and under clause(v) in respect of the related conveyance .

Clause (i) of sub-section (1) envisages that if a person supplies or receives any goods in contravention of any provisions of this Act or the rules made thereunder with intent to evade payment of tax then such goods shall be liable for confiscation and penalty . Now it is quite evident that in case of taxable goods , seized under sub-section (1) of section 129, to settle the intention to evade tax is trivial but in case of exempted goods seized under sub-section (1) of section 129 following legal aspects will have to be taken into account . It is to be noted that clause (47) of section 2 of the Act embodies following provisions :

“exempt supply” means supply of goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11 (of this Act )  and under section 6 of the Integrated Goods and Services Tax Act , and includes non-taxable  supply .

It should also be borne in mind that as per clause(78) of the Act non-taxable supply means supply of goods or services or both which is not leviable to tax under this Act or under Integrated goods and Services tax Act .

Also section (11) of the Act ( similar provisions are embodied in IGST Act , 2017) embodies following provisions :

“11. Power to grant exemption from tax :

(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of taxany goods or services or both on which tax is leviable.

(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

Explanation.––For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.”

Thus as per the provisions of sub-section (1) of section 11 of the Act the Government may by notification declare in the public interest certain goods exempt absolutely or exempt with certain conditions from such date as may be specified in such notification.

Hence by going through all the aforesaid provisions the exempted goods may be classified into following four categories :

(1) goods nil rated under the Act .

(2) goods non-taxable under the Act

(3) goods exempted absolutely by the Government by notification and

(4) goods exempted conditionally by the Government by notification . This category of goods will include such taxable goods , which under certain specified   conditions , have been declared exempt by notification issued by the Government .

Now in case of aforesaid first and third category of exempted goods , if such goods have been seized by an order under sub-section (1) and subsequently an order passed under sub-section (3) of section 129 has not been complied by the concerned person , a case shall have to be made out that such goods are to be used in the manufacturing of taxable goods , only then ingredient of intention to evade payment of tax shall be satisfied . If such a case is not made out then no confiscation shall be possible under clause(i) of sub-section (1) of this section .

In case of second category of non-taxable goods , if such goods have been seized by an order under sub-section (1) and subsequently an order under sub-section (3) of section 129 has not been complied by the concerned person , two types of scenario may emerge . First scenario will relate to the use of such goods  in the manufacture of taxable goods and if such a case is made out then it will satisfy the ingredient of intention to evade payment of tax . Secondly a case may be made out that such goods are to be used for the purposes other than the purpose for which the goods are non-taxable under the Act and then it will satisfy the ingredient of intention to evade payment of tax .

The second scenario may be better understood with the help of an example . It is quite evident that zero rated supply of goods is non-taxable under the Act and as such if the concerned person declares the supply of goods  for export but it is found that such goods are actually going to be supplied  to any person within India in the cover of export, then in such a case the ingredient of intention to evade payment of tax shall be satisfied and goods shall be liable for confiscation if the order under sub-section (3) of section 129 has not been complied by the concerned person . It is pertinent to note that zero rated supply has been defined in section 16 of the IGST Act , 2017 .

In case of fourth category of exempted goods the violation of conditions as specified by notification in subjecting these goods to exemption , may be sufficient to conclude that there is intention to evade payment of  tax or if  in respect of such goods  a case can be made out that such goods are to be used in the manufacturing of taxable goods then also the ingredient of intention to evade tax shall be satisfied .

Clause(ii) of sub-section (1) envisages that if a person does not account for any goods on which he is liable to pay tax under this  Act then such goods shall be liable for confiscation and subsequently penalty shall be leviable . Now it is quite evident that action under this clause may only be carried out if the goods in question are taxable under the Act . If goods are exempted under the Act then no action under this clause is possible .

Clause (iii) of sub-section (1) envisages that if a person supplies any goods liable to tax under this Act without having applied for registration then such goods shall be liable for confiscation and subsequently penalty shall be leviable. Now it is quite evident that this clause has two ingredients :

(a) such goods must be liable to tax under the Act

(b) the concerned person has supplied such goods without having applied for registration .

Thus it is quite clear that an action under this clause shall be possible only in case of taxable goods and no action may be possible in case of exempted goods under this clause .

Clause (iv) of sub-section (1) envisages that if a person contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax , then such goods shall be liable for confiscation and subsequently penalty shall be   leviable . Thus for confiscation of goods under this sub-section the following two ingredients will have to be satisfied :

(i) the concerned person must have contravened the provisions of the Act or the rules made thereunder .

(ii) such contravention must be with the intent to evade payment of tax .

Clause(v) of sub-section (1) is related to confiscation of conveyance and subsequent levy of penalty. This clause envisages that if a person 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 such conveyance shall be liable for confiscation and subsequently penalty shall be levied in such cases.

Thus to avoid action under clause (v) of sub-section (1) the owner has to prove that-

(a) the conveyance in question was so used without the knowledge or connivance of such owner or his agent , if any and

(b) the conveyance in question was so used without the knowledge or connivance of the person in charge of the conveyance .

It is significant to note that this sub-section concludes with the operating lines – “all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122. ” This means that for the aforesaid violation the penalty has to be imposed under the provisions contained in section 122 only . For this it is significant to find such clauses of section 122 which shall be applicable in the aforesaid cases .

A close study of section 122 reveals that clause (xiv) and clause (xviii) of sub-section (1) of section 122 are prima facie relevant for imposition of penalty in respect of goods confiscated under sub-section (1) of section 130 . these clauses embody following provisions :

“122(1) . Where a taxable person who –

(xiv) transport any taxable goods without the cover of documents as may be specified in this behalf ;

(xviii) supplies , transports or stores any goods which he has reasons to believe are liable to confiscation under this Act ;

he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or . . . . . .”

It should also be borne in mind that this sub-section starts with the words “Where a taxable person ” . this means to impose penalty under sub-section (1) of section 122 , the person against whom the penalty proceedings are to be carried out must be a taxable person . It is also important to note that under clause (xiv) the only significant condition is that the person transporting the goods must be doing so without the requisite documents as may be specified in this behalf . It is pertinent to note that Rule 138A of CGST Rules , 2017 ( similar provisions are embodied in UPGST Rules , 2017 ) describes the documents to be carried alongwith the goods during their transportation . This Rule embodies following provisions :

“138A: (1) The person in charge of a conveyance shall carry –

(a) the invoice or bill of supply or delivery challan , as the case may be ; and

(b) a copy of the e-way bill in physical form or the e-way bill number in electronic form or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner :

Provided that nothing contained in clause (b) of this sub-rule shall apply in case of movement of goods by rail or by air or vessel :

Provided further that in case of imported goods , the person in charge of a conveyance shall also carry a copy of the bill of entry filed by the importer of such goods and shall indicate the number and date of the bill of entry in Part A of Form GST EWB-01 . “

It is also pertinent to note that where confiscation of goods is to be made as a result of non-compliance of order under sub-section (1) of section 129 , it is obvious that such order must have clarified the time limit in which the amount as envisaged by clause (a) or (b) or (c) must be deposited by the defaulting person , failing which the proceedings of confiscations shall be carried out . Thus the requisite of clause (xviii) of sub-section (1) of section 122 that any goods which he has reasons to believe are liable to confiscation under this Act” will automatically be satisfied in such cases and hence the penalty proceedings shall be legally carried out with full force under this clause in such cases of confiscation of goods .

Sub-section (2) of section 130 envisages that where confiscation of goods or conveyance is authorised by the Act ,  the proper officer shall give an option to the concerned person  to pay such fine as the said officer deems fit , in lieu of confiscation .

The first proviso to this sub-section clarifies what shall be the maximum limit of such fine and provides that such fine shall not exceed the market value of the goods confiscated excluding the tax chargeable thereon .Thus if the market values of the goods confiscated is V and the tax chargeable on such goods is T then maximum fine F shall be equal to V – T . It is reiterated that according to the provisions embodied in section 15 of the Act the value of goods includes the tax chargeable on it .

The Second proviso to sub-section (2) of section 130 is very important as it clarifies that whatever amount of penalty is determined under section 122 and whatever fine has been imposed by the proper officer under sub-section (2) of section 130 , the sum of these two amounts should not be less than the amount of penalty determined by the order under sub-section (3) of section 129 .

The third proviso to sub-section (2) of section 130 provides that where any such conveyance is used for the carriage of goods or passengers for hire , the owner of such conveyance shall be given an option to pay a fine equal to the tax payable on the goods transported , in lieu of the confiscation .

Sub-section (3) of section 130 envisages that where any fine is imposed in lieu of confiscation of goods or conveyance under sub-section (2) of section 130 ,  in addition to such fine , the concerned person shall also be liable to pay any tax , penalty and charges payable in respect of such goods or conveyance. This concerned person may be the owner of the goods or conveyance or the person as referred to in sub-section (1) of section 130.

It is pertinent to note that according to the provisions embodied in sub-section (4) of section 130 , before passing an order of confiscation of goods or conveyance , the proper officer shall provide an opportunity of being heard to the concerned person .

Sub-section(5) of section 130 clarifies that once the confiscation of goods or conveyance is made , the title of such goods or conveyance shall vest in the Government and therefore such goods or conveyance shall become property of the Government .

Sub-section (7) of section 130 envisages that if the proper officer is satisfied that such confiscated goods or conveyance are not required in any other proceedings under the Act or the rules made thereunder  , then after giving a reasonable time not exceeding three months to the person concerned to pay the fine in lieu of confiscation , he shall dispose of such goods or conveyance and  deposit the proceeds of such sale proceeds with the Government .

Thus to take action under sub-section (7) of section 130 following two conditions must be satisfied :

(1) the confiscated goods or conveyance must not be required  in any other  proceedings under the Act or the rules made thereunder .

(2) the concerned person must have failed to pay the fine in lieu of confiscation within reasonable time not exceeding three months as provided by the  proper officer .

It is also pertinent to note that section 131 makes it quite evident that without prejudice to the provisions contained in the Code of Criminal Procedure , 1973 , the confiscation made or penalty imposed as per the provisions embodied in section 130 , shall not prevent taking of other measures of punishment to which the concerned person is liable under other provisions of the Act or under any other law for the time being in force .

Yogendra Kumar 

Retd. Additional Commissioner (Law) 

Commercial Taxes , Uttar Prdesh 

   

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