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Section 129 of the CGST Act: A Detailed Overview

The detention, seizure, and release of goods and conveyances while they are in transit fall under Section 129 of the Central Goods and Services Tax (CGST) Act, 2017. When tax authorities suspect tax evasion or non-compliance during the transit of goods, they can take the following actions, which are outlined in this section. In this article, we give a thorough explanation of Section 129, covering its main clauses, guidelines, and more.

Table of content

Inspection of Goods in Transit

Provisions of Section 129 of the CGST Act

Penalty on Seized Goods

Procedure of Seizure of Goods in Transit

Confiscation of Goods under GST

Fine on Confiscated Goods

Detention, Seizure, and Confiscation: Understanding the Difference

Conclusion

Most Asked Questions

Inspection of Goods in Transit

Before digging deep into the provisions of Section 129 of the CGST Act, we must highlight the concept of inspection of goods in transit. An e-way bill is required for any "movement" of commodities (i.e., transportation of products) costing more than Rs 50,000 by a registered person. The right officer can intercept items in transit if they are authorised by the State or the Centre. The driver of a vehicle transporting more than Rs 50,000 worth of products must have the relevant paperwork on hand, including an invoice and an e-way bill. The appropriate officer can inspect the documents and products when they are intercepted.

Provisions of Section 129 of the CGST Act

Detention of Goods and Conveyance

In accordance with Section 129(1) of the CGST Act, the appropriate officer (tax authority) may detain both the goods and the conveyance (vehicle) that is transporting them if they have reasonable suspicion that any goods are being transported in violation of the Act's or the Rules' provisions. For instance, a tax officer may detain both the products and the truck if they are discovered to be moving taxable items without the necessary e-way bill or other paperwork.

Notice and Order

Within seven days of detaining the items and the conveyance, the appropriate official is required to provide a notice outlining the reasons for the detention and giving the owner of the goods or the conveyance a chance to be heard. For instance, the tax officer must notify the transporter or consignee of the reasons for detention if items are held because of inconsistencies in the invoice or e-way bill.

Release of Goods

Under Section 129(2) of the CGST Act, the goods and conveyance may be released if the owner of such detained goods or the person in charge of the conveyance gives security for the same, along with any applicable interest, or pays the necessary tax and penalty. For instance, the owner can pay the Rs. 10,000 tax and penalty for held goods to ensure the products and vehicle are released.

Provisional Release

If the amount of the tax and penalty is disputed, Section 129(2) also permits the provisional release of goods and conveyance upon the performance of a bond and the presentation of security. For instance, the products and conveyance may be freed provisionally if the transporter contests the amount of the tax and penalty and offers security equal to the contested amount.

Final Order

In accordance with Section 129(3), the appropriate officer shall release the goods and conveyance after taking into account the owner's representations and determining that the items were held without a legitimate reason. For instance, the officer is required to release the items if it turns out that they were held because of a miscommunication or erroneous interpretation of the law.

Owner or Person in Charge Penalty

The items may be sold to recoup the debt, and Section 129(5) may impose a penalty equal to the tax owed or Rs. 25,000 (whichever is less) if the owner of the goods or the person in charge of the conveyance neglects to pay the tax and penalty or provide the necessary security. For instance, a penalty of Rs. 15,000 may be applied if the owner of the detained items neglects to pay the tax and penalty, which is Rs. 15,000.

Penalty on Seized Goods

Any commodities, associated paperwork, and the vehicle transporting them will be seized if someone transports them in violation of the GST Act. Only after the tax and penalty have been paid will the goods be released. In this instance, there are two possible outcomes:

If the products' owner comes forward, a 100% penalty equivalent to the tax amount will be assessed.
A penalty of 50% of the goods' pre-tax worth will be assessed if the owner does not come forward.
For exempted commodities: Rs. 25,000, whichever is less, or 2% of the products' value if the owner steps forward, or 5% if the owner does not.

The penalty procedure is clearly illustrated in the table below:

Particulars	Owner comes forward	Owner does not come forward
Value of goods	Rs. 1,00,000	Rs. 1,00,000
GST@18%	Rs. 18,000	Rs. 18,000
Penalty	Rs. 18,000	Rs. 50,000
Total Payment	Rs. 36,000	Rs. 68,000

Procedure of Seizure of Goods in Transit

Only once the individual conveying the commodities has been given an order of detention can the goods and the vehicle be seized or detained. The tax officer will issue a notice outlining the amount of tax owed and issue an order for the payment of the tax and penalty upon detention. Everyone will get a chance to be heard. All items that are under detention will be released upon payment of both the tax and penalty. The items will be seized if the owner does not make payment within seven days. If the commodities are harmful or perishable, the seven-day period will be shortened.

Confiscation of Goods under GST

The items and the vehicle will be confiscated if someone –

Provides or receives goods in violation of the GST regulations in order to avoid paying taxes.
Unable to explain the existence of confiscated items.
Provides things without registering, despite the fact that he is required to do so.
Breaks the law to avoid paying taxes
Transports goods using any kind of vehicle or conveyance in violation of the GST regulations

If the vehicle’s owner can demonstrate that it was utilised without his knowledge, the vehicle may not be seized. In any of the aforementioned situations, penalties will also be applicable. Please read our post to learn more about GST fines. The tax officer must provide the option to pay a fine in lieu of confiscating the goods before doing so.

Fine on Confiscated Goods

The minimum penalty will be 50% of the products' pre-tax value if the owner does not come forward, and 100% tax if the owner does. The market worth of the products before taxes will be the maximum fine. The owner will be offered the choice to pay a fee equivalent to the tax due on the products to have the car seized. The other penalties that apply are not absolved by a fine instead of confiscation. After paying the fine instead of confiscation, further taxes, fees, and penalties will still need to be paid. The confiscation of goods will not occur without a notice of cause and a hearing. The products will belong to the government after they are seized. The confiscation fine must be paid within three months, after which the goods will be put up for sale. Other penalties under the GST laws will remain apply despite confiscation; that is, all fines and prosecutions will still be applied.

Detention, Seizure, and Confiscation: Understanding the Difference

Detention is the process of denying the owner of the items access through a court order or notification. Nonetheless, the owner still retains ownership of the products. It is given out when there is a suspicion that the items could be seized. Seizure is the process by which the department actually takes custody of the goods. Only after an inquiry or investigation has determined that the goods are subject to confiscation may a seizure be made. The final step following appropriate adjudication is the confiscation of the goods. Following confiscation, the original owner loses both possession and ownership, and the Government Authority gains control.

Conclusion

If tax officials suspect non-compliance, they are authorised by Section 129 of the CGST Act to hold and confiscate commodities and conveyances while they are in transit. But the law also guarantees due process, which includes sending out notices, hearing arguments, and releasing items after taxes and penalties have been paid. Penalties and even the sale of held goods may follow noncompliance with these laws. Businesses and transporters must make sure that GST requirements are followed in order to prevent delays and fines when shipping goods. For the legitimate and efficient transportation of products under the GST regime, it is imperative to comprehend Section 129 and its ramifications.

FAQ

Q1. What is Section 129 of the CGST Act?

The CGST Act's Section 129 addresses the detention, seizure, and release of goods or vehicles in transit where the provisions are broken.

Q2. What is the fine for Section 129?

Prior to the modification, Section 129 of the Act stated that if someone transports goods in violation of the Act's provisions, the vehicle and the items may be seized and detained; they would only be released upon payment of a penalty equal to 100% of the tax owed.

Q3. What is the detention of goods under GST?

The CGST Act, 2017's Section 129 addresses the arrest, seizure, and release of commodities and automobiles while they are in transit. Goods may be seized or detained if they are transported illegally or without the required paperwork.

Q4. What is detention and seizure of goods?

Q5. What is the maximum time limit for the release of the seized goods?

A notice must be given within six months of the commodities being seized; if no notice is given within that time, the items will be returned. However, if there is good reason, the Commissioner may prolong this six-month period by an additional six months.

Q6. What is the procedure for the detention of goods under Section 129?

An order of detention must be issued to the person transporting the items in order to detain the goods or conveyance. According to section 129(5), all actions pertaining to the notification issued in Form GST DRC-01 would be considered closed upon payment of the prescribed amount for the release of goods.

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