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Detention and release of goods and conveyance in GST

Section129 of the Central Goods and Services Tax Act, 2017 deals with the provisions of detention and release of goods and conveyance. The said provisions are simplified in the present article.

Difference between ‘detention’, ‘seizure’ and ‘confiscation’-

There is always been a confusion with regard to the word ‘detention’, ‘seizure’ and ‘confiscation’. Prior to understanding the provisions of detention and release of goods, it is important to understand the basic difference between the word ‘detention’, ‘seizure’ and ‘confiscation’.

Detention of the goods means not permitting access to the owner of the goods via a legal order or legal notice. Here, the ownership of the goods remains with the owner only.

On the other hand, seizure of goods means the actual possession of the goods will be taken over by the departmental officer. Here, the ownership of the goods gets transferred to the government.

Whereas, confiscation of goods means both the ownership and possession of the goods goes into the hands of the department/ government. Basically, confiscation is the final act post proper adjudication.

Notably, in the present article, we will only deal with detention and release of goods and conveyance.

Provisions relating to detention of the goods and conveyance-

Section 129(1) of the Central Goods and Services Tax Act, 2017 covers the provisions of detention of goods and conveyance. The provisions are simplified hereunder-

  • Detention of goods will be carried out under the following circumstances-
  • Detention of conveyance will be carried out under the following circumstances-
    • Any conveyance which is used as a means to transport the goods which are in contravening the provisions of the Act and rules made thereunder.

Procedure for the detention of goods and conveyance-

The procedure to be followed for the detention of goods and conveyance is explained hereunder-

  • Firstly, as per rule 142(1)(a) of the CGST Rules, the proper officer will serve a notice in Form GST DRC-01.The notice should specify the amount of tax and penalty payable.
  • Thereafter, an opportunity of being heard (i.e., personal hearing) will be given to the concerned person.
  • The proper officer will pass an order in Form GST DRC-07 [rule 142(5) of the CGST rules, 2017] specifying the amount of tax, interest and penalty payable by the concerned person.
  • Notably, in case the person transporting the goods or the owner of the goods fails to pay the specified amount of tax and penalty within a period of 14 days from the date of such detention. Then, the proceedings under section 130 of the CGST Act (i.e., proceedings of confiscation of the goods/ conveyance) will be initiated.

However, such a period of 14 days will be reduced by the proper officer in case the detained goods are any of the following-

  • Perishable goods; or
  • The goods are hazardous in nature; or
  • The goods are such that their value depreciates with the passage of time.

Provisions relating to release of the goods and conveyance-

The provisions relating to the release of goods are covered under section 129(1) sub-clause (a), (b) and (c). Basically, the release of goods depends upon the following two situations-

  1. Release of goods, when the owner comes forward for payment of tax and penalty; and
  2. Release of goods, when the owner doesn’t come forward for payment of tax and penalty.

Based on the above two situations, the amount to be paid for release the goods are-

Particulars

Amount payable to release the goods

The owner agrees to make the payment

The amount payable for release of the goods-

  1. In the case of exempted goods, the amount to be paid will be lower of the following-
  • INR 25,000; or
  • An amount equivalent to 2% of the value of the goods.
  1. In any other case, the following amounts need to be paid-
  • Applicable tax; and
  • Penalty equivalent to 100% of the tax payable on such goods.

Notably, goods will also be released if the security equal to the amount payable, as above, is furnished [section 129(1)(c)].

The owner doesn’t agree to make the payment

The amount payable for release of the goods-

  1. In the case of exempted goods, the amount to be paid will be lower of the following-
  • INR 25,000; or
  • An amount equivalent to 5% of the value of the goods.
  1. In any other case, the following amounts need to be paid-
  • Applicable tax; and
  • Penalty amount =50% of the value of goods (-) the amount of tax paid.

Notably, goods will also be released if the security equal to amount payable, as above, is furnished [section 129(1)(c)].

Procedure post payment of specified amount-

As per rule 142(3) of the CGST Rules, 2017, once the concerned person makes the payment (as tabulated above) for the release of goods within a period of 14 days of detention of the goods/ conveyance. Then-

  1. The person will have to intimate about the payment to the proper officer in Form GST DRC-03; and
  2. The proper officer will issue an order concluding the proceedings in Form GST DRC-05.

Important points-

  • In order to detain the goods/ conveyance, it is mandatory to issue an order of detention on the person transporting the goods.
  • As per rule 53(3) of the CGST Rules, the invoice/ debit note issued in fulfilment of the tax payable in accordance with section 129 should prominently contain the following words-
    • ‘Input Tax Credit not admissible’
  • As per section 129(5), on payment of the specified amount for release of goods, all the proceedings in respect of notice issued in Form GST DRC-01 will be deemed to be concluded.

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Author:

CA Poonam Gandhi


Jul 13, 2021

Comments


In any article please elaborate this part ...As per rule 53(3) of the CGST Rules, the invoice/ debit note issued in fulfilment of the tax payable in accordance with section 129 should prominently contain the following words-
‘Input Tax Credit not admissible’
By: Anil Kumar Sharma | Dt: Jul 13, 2021
I read very useful information provided by you
By: Ravi Arora | Dt: Jul 18, 2021


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