By Jigar Mansatta
What if your asset has been detained or seized by the Goods and Services Tax department? For every business entity, such detention and seizure bring losses which are neither bearable nor recoverable. In this article, we cover situations under which such a section can be applied by the department and what remedies are available to the assessee.
Situation under which section 129 of CGST Act, 2017 can be invoked
In the case where any person transports any goods or stores any goods while they are in transit in contravention of the provision of CGST Act, 2017 or 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.
The penalty for the release of such goods and conveyance will be as follows:
Order of detention or seizure on the person transporting the goods is required to be passed and opportunity of being heard shall be given to such person before determining penalty leviable on such person.
This section impacts every business entity and the penalty is determined in terms of the value of goods in cases where the owner of goods does not come forward for payment of such; points under which shelter can be taken have been determined in the later part of this article.
Situation under which section 130 can be invoked
Mainly section 130 of CGST Act, 2017 deals with supplies which are in contravention of any provisions of CGST Act, 2017 or rules made thereunder, supply of taxable commodity without applying for registration, without accounting for any goods on which he is liable to pay tax or uses any conveyance as a means of transport for carriage of goods in contravention of the provisions.
| Particular | Range of Penalty |
| Where owner of goods come forward for payment of penalty | Not lower than 100% tax payable on such goods and Not Higher Market value of goods confiscated |
Illustration: The vehicle of a person has been confiscated under section 130 of CGST Act, 2017; where the value of goods shown in the Invoice is Rs. 1,00,000 tax levied on such goods Rs. 18,000. The market value of such goods is Rs. 1,50,000.
In the above case penalty shall be levied in the range of Rs. 18,000 to Rs. 1,50,000.
This gives wide powers to assessing officers who have confiscated goods or conveyance under section 130 of CGST Act, 2017.
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Frequently asked questions
Can sections 129 and 130 be invoked together?
Section 130 has a much wider scope than section 129, as it already covers all the aspects of section 129 apart from that it has many areas that are not covered in section 129; the main concept that segregates both sections is intent to evade payment of tax.
For. e.g., In case there are discrepancies in the e-way bill; the matter is covered in section 129 and section 130 as well; in such case, the onus to prove that there was no intention to evade tax will be on the assessee and this will decide whether section 129 will be applicable or section 130 will be applicable.
Is there any remedy that without payment of penalty goods can be released?
Goods confiscated under section 129 or section 130 cannot be released without payment of penalty. However, as per section 129 assessee may release conveyance payment of penalty or Rs. 1,00,000 whichever is lower and if the case belongs to section 130 and conveyance used was on hire, the owner of conveyance fine equal to the tax payable on the goods being transported thereon.
What is the major contravention that attracts section 129 or section 130?
The major contravention that attracts levy of section 129 or section 130 is related to failure on part of e-way bill provisions and rules made thereunder. Failure on part of e-way bill provisions may be due to; where goods are been transported without generation of e-way bill even when it was need of hour; or e-way bill generated has expired before transportation is complete and is not been extended or e-way generated is for wrong vehicle number and the list of multiple scenarios goes on.
Is there any relief provided by the government in case if there is any minor breach in e-way bill on part of assessee?
As per Circular No.64/38/2018-GST in case there are minor discrepancies in details mentioned in the e-way bill but the invoice accompanying the goods in movement is in order then penalty will not be levied under section 129 or 130 of CGST Act, 2017.
- Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is correct;
- Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill;
- Error in the address of the consignee to the extent that the locality and other details of the consignee are correct;
- Error in one or two digits of the document number mentioned in the e-way bill;
- Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned is correct;
- Error in one or two digits/characters of the vehicle number. In case if entire vehicle number is wrong, the proceedings will be initiated under section 129 or 130 of CGST Act, 2017. In this case penalty will be Rs. 500 each under section 125 of the CGST Act and the respective State GST Act should be imposed (Rs.1000 under the IGST Act) in FORM GST DRC-07 for every consignment.
Whether change in route would be sufficient to invoke section 129 or 130 of CGST Act, 2017?
As per judgment delivered by Hon’ble Gujarat High Court which states that Mere change of route of transport vehicle without anything more would not necessarily be sufficient to draw an inference that intention was to evade tax. (Karnataka Traders vs State of Gujarat) (2022).
In the same case, it was held that Mere undervaluation of goods also by itself was not sufficient to detain goods and vehicles far from being liable to confiscation. It is also supported by a circular issued by the Government of Kerala.
Whether section 129 or section 130 of CGST Act, 2017 can be invoked in cases where goods are attracting a different HSN classification and rate of tax?
It was held that the Competent Authority cannot detain goods of the assessee under transport, on the ground that the description of goods in the invoice was incorrect and it was attracting a different HSN classification and rate of tax. (Podaran Foods India (P.) Ltd. v/s State of Kerala) (2021).
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What does the term “Owner comes forward” means in section 129 of CGST Act, 2017?
The term “Owner comes forward” is used to determine that liability is to be paid by owner of goods.
Illustration: Goods of Mr A were transported by Mr B to the premises of Mr C. Now if such goods are confiscated under section 129 or section 130 of CGST Act, 2017 then the owner of the Goods is Mr A and he will be required to pay a penalty through his GSTIN. Quantum of penalty will be limited to 200% of tax payable on such Goods (In case of Taxable Goods) 2% of the value of such Goods (In case of Exempted Commodity Goods) or Rs. 25,000/- whichever is Lower. In all other cases (i.e., if Mr B or Mr C wants to make payment) penalty will be – in the case of Taxable Goods 50% of the value of such Goods or 200% of tax payable on such Goods, whichever is Higher and in case of Exempted Commodity Goods 5% of the value of such Goods or Rs. 25,000/- whichever is Lower.
Can an e-way bill which expired while goods were still in transit be considered a Minor Breach?
Even though we have many judgements which are in favour of the assessee including recent judgements delivered by Hon’ble Madhya Pradesh High Court and Hon’ble Allahabad High Court; where it was held that e-way expired during transit due to circumstances beyond the control of the assessee then the department shall not necessarily invoke section 129 or section 130 of CGST Act, 2017; however, if we go with a plain reading of rules made thereunder for preparation and generation of e-waybill along with circular issued by departmental authorities this cannot be considered as a minor breach. Therefore, whether it can be considered a minor breach or not will depend on the facts and circumstances of a particular case.
There are many situations which are still unearthed and which will be resolved over a period of time, based on various judgments and clarifications issued by the GST department.
(The author is a Charter Accountant. Views expressed above are those of the author and not of financialexpress.com)
