Confiscation of Goods Under GST – GST Act

Ashish M. Shaji

03 Nov, 2020

Confiscation of goods is the ultimate act once proper adjudication is achieved. As soon as confiscation is executed the ownership and the possession goes out from its original owner to the governmental authority. Here we will discuss the topic confiscation of goods under GST. Provisions relating to it are given under Section 130 of Central Goods and Service Tax Act, 2017^[1].

Are Confiscation, Detention and Seizure the same?

It may be noted that these three terms are closely linked to each other but to think they mean the same, would be incorrect. Then what is the difference? Let’s find out.

• Detention

Detention is not permitting access to the owner of the goods by a legal order. However the ownership remains with the owner.

• Seizure

Seizure means taking over the actual possession of goods by the authority.

• Confiscation

Confiscation takes place after adjudication and the owner losses its ownership and possession. It is taken over by the governmental authority. 

When are goods Confiscated?

The Act states that in the following situations goods or conveyances are to be confiscated and the penalty is to be imposed:

1. The taxpayer has supplied or received any goods in contravention with any provisions of the law with an intention to evade taxes.
2. The taxpayer is not accounting for such goods on which he is required to pay taxes on.
3. Any person makes a supply of taxable goods without obtaining GST registration under the Act.
4. If any person is in contravention of any of the provisions of the law, and such contravention is done with an intention to evade taxes.
5. If any person uses any conveyance as a means of transport for carriage of goods in contravention with the provisions of the Act and rules made thereunder. However, if the owner of such conveyance proves that such conveyance was used without giving any intimation to him (owner of conveyance), his agent, if any or any other person who is in charge of such carriage, then he may evade confiscation.

Confiscation of goods under GST: Fine in lieu of Confiscation

For Goods

The Act has also provided the provision to pay fine in lieu of confiscation. It means that any person can stop the confiscation of his goods, as the Act requires the adjudicating officer passing the order of confiscation to give an option to the owner of goods to pay some fine instead.

Conditions relating to Fine

• The amount of this fine should be less than or equal to the market value of such confiscated goods excluding the tax levied on the same.
• The aggregate of such fine and penalty shall not be less than the amount of penalty imposed under sub-section (1) of section 129.

For Conveyance

In case any conveyance is hired for transfer of carriage of goods or passengers, then the owner of such conveyance should be given an option to pay fine in lieu of confiscation of such conveyance. Amount of such fine shall be less than the amount of tax that is to be charged on such goods transported through them.

Pre-Conditions for such confiscation

There are certain preconditions to be kept in mind in case of confiscation of any goods under the Act. They are:

• Any fine imposed in place of confiscation of goods, then it does not imply that such a person will become immune to any other action. They can still be charged with additional tax, penalty or any other charges on such goods.
• Such order for confiscation of goods or penalty charged on them can be implemented until the person charged is given an opportunity of being heard.
• Once such goods or conveyance are confiscated their title will vest with the Government i.e. they will become the property of the government. This is a major difference between detention and confiscation.
• The proper officer is required to take possession of such confiscated goods or conveyance.
• Such confiscated goods are to be kept in custody of the proper officer for a period of three months when the owner of such goods can retrieve the same by paying fine in lieu of confiscation. But if such person fails to such fine in 3 months period and the proper officer is of the opinion that these goods have no further use in the proceedings of the law, then he should dispose such goods off and deposit the sale proceeds with the government.

Confiscation of goods under GST: Confiscation does not replace other punishments

One more thing we should bring some clarity about is the relation between confiscation, other punishments imposed and penalty under the GST Act. If any goods or conveyances are confiscations or any penalty is charged for the same under the provisions of the law or rules made thereunder, then it will not affect any other punishments imposed on such person under any other provisions of the Act or rules made thereunder.

It means that confiscation, penalty and any other punishments can be simultaneously imposed on any goods or services if they are charged under the Act or any rules thereunder.

Conclusion

It may be noted that confiscation of goods under GST would mean that the actual owner ceases to have any right on such goods. The ownership as well as the possession transfers to the government authority.

Read our article: Power of Tax Authorities to conduct Special Audit under GST Act