In-transit, inspection plays a critical role in law enforcement under any Indirect tax system. Interception, detention and seizure provisions of the GST Law perform the function of administrating law on a real time basis to check tax evasion during movement of goods.
Each term represents a different stage in a proceeding and the rigours increase as the stage progresses. Rights and obligations of the officer and the tax payer are different at each level of the proceeding and hence one needs to be mindful of the stage of the proceedings while addressing the questions of the officer. Majority of such cases fails on jurisdictional & procedural issues.
Let us understand the detailed provisions relating to every aspect:
Interception/Inspection
- Section 68(1) read with Rule 138 to 138D stipulates the person in charge of conveyance to carry documents as may be prescribed.
- Section 68(2) &(3) provides powers to proper officers to inspect the conveyance an requiring person in charge to produce the documents for verification.
Where the person in charge of conveyance fails to produce documents, then the following course of action can be initiated by proper officer –
Form Time Limit Purpose of the Form
- GST MOV-01 NA Record a Statement of Person in Charge
- GST MOV-02 NA Requiring person in charge to station the conveyance at the place mentioned in such order
- Part A of GST Within 24 hours of issuing GST Prepare an initial report of inspection
EWB-03 MOV-02 - GST MOV-03 NA Obtaining approval from commissioner for extending time period of 3 days
- GST MOV-04 Within 3 days of Physical verification Prepare a report of physical verification
- Part A of GST Within 3 days of Physical verification Prepare a Final report of inspection
EWB-03 - GST MOV-05 NA Where no discrepancies are found after the inspection, proper officer shall allow the conveyance to move further.
Detention & Seizure
- Section 129 of CGST Act gives powers to proper officers to detain the goods/conveyance if he found some discrepancies at the time of inspection and following course of action can be initiated by him –
Form Time Limit Purpose of the Form
GST MOV-06 NA Where proper officer is of the opinion that goods need to be detained, he shall issue an order of detention
GST MOV-07 NA Notice for the detention of goods/conveyance specifying the tax and penalty payable
GST MOV-08 NA Obtaining a bond in terms of 129(1)(C) of CGST Act
GST MOV-09 NA Demand Order
- Penalty – Detention/ seizure of goods and conveyance used for transport of goods. Can be released on
- Payment of tax and penalty(100% of tax) where owner comes forward OR
- In all other cases, Payment of tax and penalty (50% of value of goods less any tax already paid)
Confiscation
The fine legal difference between detention and confiscation is that detention is invoked only on suspicion over tax evasion whereas confiscation requires reasons beyond doubt that the goods are a result of tax evasion. (Kerala High court in Indus Towers vs. Asst. State Tax Officer 2018)
- Section 130 of CGST Act lists outs five circumstances where goods will be liable for confiscation-
- Supplies or receives goods in contravention of the provisions of act with intention of tax evasion
- Does not account for goods liable for paying tax
- Supplies goods without obtaining a registration
- Contravenes any provisions of act with intention of tax evasion
- Uses any conveyance as means of transport for tax evasion
- Other than above, proper officer can also order for confiscation if demand ordered during detention is not paid within 7 days.
The following course of action can be initiated by him –
Form Time Limit Purpose of the Form
- GST MOV-10 Within 7 days from the order of detention in MOV-06 Notice for taking action under section 130 for confiscation of goods
- GST MOV-11 Order of confiscation allowing time to make payment of tax & penalty within 3 months Summary of every order of GST MOV-09 and GST MOV-11.
- GST DRC-07 Also imposes a nominal penalty of Rs. 500 in each Act under various situations as mentioned below in this article.
No order of confiscation shall be issued without giving the person an opportunity to be heard.
Consequences of GST Mov-11 –
- Title of such conveyance shall stand transferred to the Central Government
- In case neither the owner of goods nor any person other than the owner of goods comes forward to make the payment of tax, penalty and gets the goods release in time(3 months), the proper officer shall auction the goods and/or conveyance by a public auction and remit the sale proceeds to the account of the Central Government.
Penalty
- All such goods and/ or conveyance shall be liable to confiscation and the person shall be liable to penalty under section 122
- Option to pay fine in lieu of confiscation which:
- Shall not exceed Market value- tax on such goods;
- Shall not be less than penalty u/s 129
Important Points to Consider
- Relaxation to be provided in time limit for issuing notices/order in case of perishable or hazardous goods.
- Where an order passed under CGST act, a corresponding order shall be passed by him under SGST/UTGST Act.
- Demand of tax, penalty, fine shall be uploaded in GST portal. Where no GST portal, Temporary ID shall be created by the proper officer.
- As per Rule 138C(2), where physical verification of goods has been done during transit at one place within a State or UT or in any other State or UT, no further physical verification of the said conveyance shall be carried out again in the State or UT unless a specific information relating to tax evasion is made available subsequently. Till the forms are available online, hard copies of the notices/orders issued by specified authority may be shown as proof of initiation of action as and when required.
- Only such goods/conveyance can be detained in respect of which there is a violation of provisions of this Act.
- In following cases proceedings under Section 129(Detention/Seizure) may not be initiated
- Spelling mistakes in the name of consignor or the consignee but the GSTIN is correct.
- Error in the Pin Code but address of the consignor and consignee is correct.
- Error in the address of consignee to the extent the locality and other details of the consignee are correct.
- Error in one or two digits of the document number mentioned in the eway bill.
- Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the tax rate is correct.
- Error in one/two digits/character of the vehicle number.
In the above mentioned cases, penalty to the tune of Rs 500 in each Act can be imposed in Form GST DRC-07.
- Proper officer as mentioned everywhere in this article shall be the following –
- For Inspection/Interception – Inspector of Central Tax and his superiors
- For Detention/Seizure, Confiscation – Assistant/Deputy Commissioner of Central Tax
In addition to the above penalties for the non-compliances discussed, there will also be prosecution as per provision of Section 132 of CGST Act which may extent to 5 years depending upon the severity of violation under GST Act.
Authored by: CA Sanjay Kumar Agrawal
Disclaimer: Anything written in this document is the personal understanding of the author. The author shall not be responsible for any of the decision made based on the contents of this document.
