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Union Budget 2021 Outcome 1st February 2021:
(1) Seizure and confiscation of goods and conveyances in transit are now made as a separate proceeding from the recovery of tax from Section 74.

(2) With respect to orders received on detention and seizure of goods and conveyance, 25% of penalty needs to be paid for making an application of appeals under section 107 of the CGST Act. Date of applicability is yet to be notified.

(3) Self-assessed tax referred to under section 75 of the CGST Act shall also cover the outward supplies/sales as reported in GSTR-1 under section 37 of the CGST Act but which has been missed out while reporting in GSTR-3B under section 39.

(4) The provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding till the expiry of a period of one year from the date of order made thereunder.

As per 22nd GST Council meeting of 6th October 2017
E-way Bill provisions have been deferred up to 1st April 2018. Earlier provisions regarding documents for transportation continue.

Inspection of goods in transit

Any transportation of goods (i.e. a ‘movement’ of goods) of more than Rs 50,000 by a registered person must be accompanied by an e-way bill. The proper officer has the power (authorized by the Centre or State) to intercept goods in transit. The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to carry the prescribed documents (i.e. invoice and an e-way bill). On interception, the documents and goods can be inspected by the proper officer.  

Detention & Seizure of Goods in Transit

Difference between Detention & Seizure and Confiscation

Detention
Not allowing access to the owner of the goods by a legal order/notice is called detention. However the ownership of goods still lies with the owner. It is issued when it is suspected that the goods are liable to confiscation.

Seizure
Seizure is taking over of actual possession of the goods by the department. Seizure can be made only after inquiry/investigation that the goods are liable to confiscation.

Confiscation
Confiscation of the goods is the ultimate act after proper adjudication. Once confiscation takes place, the ownership as well as the possession goes out of the hands of the original owner and into the hands of the Government Authority.

Penalty for seized goods

When any person transports any goods in contravention to the GST Act then the goods, related documents, and the vehicle carrying them will be seized. The goods will be released only on payment of tax and penalty. There can be two scenarios in this case-

• If the owner of the goods comes forward — in this case, 100% penalty (equal to the amount of tax) will be charged 
• If the owner does not come forward — 50% of the value of goods before tax will be charged as penalty

[For exempted goods- 2% (if owner comes forward) or 5% of value of goods(if owner does not come forward)           OR Rs. 25,000 —–whichever is less] The table below provides a clear example of the penalty process:

So, it stands that the penalty is much higher if the owner of the goods does not come forward. The person can also opt to furnish a security covering the amount payable.

Procedure for seizure of goods in transit

Goods and conveyance will be detained/seized only after giving an order of detention to the person transporting the goods. On detaining, the tax officer will issue a notice mentioning the tax payable and pass an order for payment of tax and penalty.

An opportunity of being heard will be given. On payment of the tax and penalty, all liabilities under detention will be discharged. If the owner does not pay within 7 days, then the goods will be confiscated.  The time of 7 days will be reduced in case of perishable or hazardous goods.

Confiscation under GST

Both the goods and the conveyance will be confiscated if any person – 

• Supplies/receives goods in contravention of the provisions of GST to evade tax
• Cannot account for the presence of seized goods
• Supplies goods without registering (even though he is liable to register)
• Violates rules to evade tax
• Uses any conveyance/vehicle to transport goods in contravention to the GST provisions

The vehicle might not be confiscated if the owner of the vehicle can prove that it was used without his knowledge. Penalty will also be applicable in each of the above cases. To know details about penalties under GST, please read our article. Before confiscating the goods, the tax officer shall give an option of paying a fine instead of confiscation.

Fine in lieu of confiscation

The minimum fine will be as per above i.e., 100% tax if the owner comes forward and 50% of the value of goods before tax if the owner does not come forward. Maximum fine will be the market value of goods before tax. For confiscation of vehicle, the owner will be given the option of paying a fine equal to the tax payable on the goods. Fine in lieu of confiscation does not discharge the other penalties applicable. Other taxes, charges, penalties will still be payable after paying fine in lieu of confiscation.

Goods will not be confiscated without a show cause notice and an opportunity of being heard. Once confiscated, the goods will become the property of the government. 3 months will be given for payment of the confiscation fine after which the goods will be sold. Confiscation will not affect other punishments under the provisions of GST, i.e., all penalties and prosecutions will still be applicable.