Changes proposed by Finance Bill, 2021 to Law governing Detention, Seizure & Confiscation of Goods and how E-Invoicing, E Way Bill can help
We are here to touch base an important matter that at times catches attention due to casual or other errors but become so crucial due to criticality of material(s) stuck due to detention, seizure or confiscation orders passed by Revenue Authorities having interrupted vessel carrying goods with inadequate or erroneous documents. Let us examine the provisions related to the subject that are important from the p.o.v. of vessel carrying goods subject matter of consignment & in the current scenario of E-Invoicing & E-way bill how these latest changes & steps taken can be of extreme importance to control such errors. E- Invoicing, E-way Bills and connected adoption, though by default in many cases might lead to drastic reduction in cases involving interruption & subsequent detention, seizure or confiscation of goods by Authorities from GST Department. By going thru this write up readers will be able to understand the recent changes that have been proposed to the Sections governing said penal provisions covering movement of goods. Let us discuss the requirements connected with Invoicing, transportation and delivery of goods vis a vis E-Invoicing in the following paragraphs:
Under current law applicable to cases subject matter of detention, seizure or confiscation, the goods or conveyance carrying movement of such goods can be interrupted for verification of underlying documents, adequacy of such documents in line with law related to movement of such goods. Upon being satisfied wrt deficiency in documents, inadequate or incomplete availability of information pertaining to goods with person in-charge of vehicle carrying such goods may lead to detention of goods. Section 129 & Section 130 of the CGST Act broadly cover situations that lead to penal provisions being imposed to the goods or vehicle carrying such goods. Rule 138A of CGST Rules 2017 specify the documents that need to be essentially in possession of person in-charge of vehicle carrying goods subject matter of consignment. It provides that person in-charge of conveyance shall carry:
(a) the Invoice or Bill of supply or Delivery challan, as the case, maybe; and
(b) a copy of the e-way bill in physical form or the e-way bill number in electronic form or mapped to RFID (Radio Frequency Identification Device) embedded on to the conveyance in such manner as may be notified by the Commissioner
Section 129 of the CGST Act provides for detention and seizure of goods and conveyances and their release on the payment of requisite tax and penalty in cases where such goods are transported in contravention of the provisions of the CGST Act or the rules made there under.
Similarly Section 130 covers governing law, non compliance whereof may lead to goods being subject matter of consignment or conveyance carrying such goods being confiscated post non compliance is established under section 129 of the CGST Act 2017.
Now we will share our analysis on changes that have been made to Section 129 and Section 130 of the CGST Act 2017 wrt provisions covering Detention, Seizure and Confiscation of goods. Probably Govt. do not want to keep both (Sections 129 & 130) connected & dependent on each other.
Clause (a) to Subsection (1) of Section 129 has been amended to provide for two hundred percent of the tax amount involved (in place of one hundred percent before amendment) & in case of exempted goods two percent of the value of goods or Rupees twenty five thousand whichever is less, where owner of the goods comes forward for payment of such penalty.
Clause (b) to Subsection (1) of Section 129 has been amended to provide for payment of penalty equal to fifty percent of the value of goods OR two hundred percent of the tax payable, whichever is higher (no such option was applicable earlier) and in case of exempted goods amount equal to five percent of the value of goods or Rupees twenty five thousand, whichever is less, wherever owner of the goods does not come forward to pay the penalty.
Subsection (2) to Section 129 covering applicability of Section 67 to above situation that gives power to proper officer not below the rank of Joint Commissioner to authorize in writing any other officer to inspect any place of business of taxable person or person engaged in the business of transportation of goods or the owner of the operator of warehouse or godown or any other place, has been done away with. Readers may note that Section 67 is still in force to the situations covered therein.
Subsection (3) to Section 129 has been amended to provide that proper officer detaining or seizing goods shall issue notice within seven days (no such timelines were provided earlier) of such detention or seizure, specifying the penalty payable and thereafter within seven days from the date of service of such notice (no such timelines were provided earlier)pass order for payment of payment of penalty in terms of Clause (a) or (b) of Subsection (1), as the case may be.
Subsection (4) to Section 129 has been amended to provide that “No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.” The words “Tax” & “Interest” that appeared before “Penalty” in above clause have been deleted from the amended provision. Meaning thereby that proper officer is not under obligation to give opportunity of being heard to taxable person before imposing interest on delayed payment of tax, if any involved in the situation & such requirement of being heard will be required in case of Penalty being imposed only.
Subsection (6) to Section 129 has been amended to provide that “Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days (fourteen days before amendment) from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3) (earlier provision provided for initiation of proceedings under Section 130 of the CGST Act 2017 under such circumstances thus removing dependency of the provision for action on section 130 of the Act):
Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less: (no such option was available to Transporter before amendment)
Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.”
Now we will take up changes proposed to above section.
In the Subsection (1) to Section 130 of CGST Act, 2017 the words “Notwithstanding anything contained in this Act, if” have been replaced by “Where”. The amended subsection states: Where any person— (i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (ii) does not account for any goods on which he is liable to pay tax under this Act; or (iii) supplies any goods liable to tax under this Act without having applied for registration; or (iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.
Proviso second to Subsection (2) of Section 130 has been amended to provide for a penalty equal to hundred percent of the tax payable on such goods. This proviso before amendment prescribed for a Penalty equivalent to the penalty leviable under sub section (1) of Section 129 of the Act.
Thus it may be noted that Section 130 too has been amended to bring changes indicating its independent applicability from provisions of Section 129 of the Act. Would recommend readers to please go thru provisions of Section 122 that cover circumstances leading to penalty that can be imposed under section 130 of the Act.
It may be noted that minor errors or lapses in preparation of documents viz Invoices, E-Way bills, LR’s, Delivery Challan(s) may not lead to goods being subjected to penal provisions of Section 129 or 130 of the CGST Act. It has been in various case laws that following errors or lapses do not form basis for applying Section 129 to goods subject matter of movement:
1. Error in mentioning of PIN code however this error should not lead to extending the validity period of E-Way Bill number.
2. Errors in mentioning the address of the consignee provided locality mentioned & actually intended for delivery are not entirely different
3. Error in four or six digit of HSN where first two digits are correct and rate of tax is also correctly mentioned
4.Spelling mistakes in the name(s) of consignee or consignee provided GSTIN mentioned is correct
5. Error in two digits / characters of vehicle number
6. Error in one or two digits of document number mentioned in the E Way Bill number.
With the E Way Bills having already been implemented & E-Invoicing implemented in phased manner effective 1st October, 2020 following the key benefits having already been observed & appreciated by the public at large & overall System under which GST Law & administration operates:
Curbing Tax Evasion & fake ITC availment: This being very vital benefit system is able to derive with the implementation of E- Invoicing system. Since invoice generation and processing is done electronically with due encryption of data, there is hardly any possibility of any alteration or change in figures or any information captured in the Invoice.
Automatic updation of GSTR-1, GSTR-2A/2B, Part A or B of E Way Bill System: With computer system at client end, GSTIN Portal and IRP being interconnected, all reporting requirements wrt GSTR-1, GSTR-2B/ 2A are automatically updated. Hitherto this happened to be a very lengthy & tedious process for assessee’s (especially with large volume of transactions) to prepare & update such returns & involved significant effort and time to finalize these returns/ reports. With this advent 3 Way Auto Reconciliation is possible wrt GSTR-1 & E-Way Bills, EWB’s & E-Invoices, GSTR-1 & E-Invoices.
Efficiency in handling of Taxing procedures & administration: With plenty of Management data requirement for monthly reporting of growth parameters viz Sales & connected figures, compilation of Sales invoices at the end of the month, a lot of effort was needed to compile & reconcile the figures from books of accounts. With the development of E Invoicing system, most of the figures are matched by default thus obviating the need for reconciliation before reporting of the figures. Efficiency level have thus enhanced many fold post E Invoicing. Moreover this has resulted ease of compliance for many persons involved in undertaking B2B transactions.
ITC verification made easy for Govt. Agencies: Govt. agencies had to invest significant effort in verification of ITC figures claimed by Assessee’s in their respective GSTR-3B summary that was usually sourced from books of accounts of the asssessee, authenticity whereof was a big question that needed validation before benefit of ITC could be provided thereon. With E –Invoicing having come in to effect wrt B2B transactions, all Invoices are automatically updated not only in the Sellers system but also in the Purchaser entity’s data for claim of ITC wrt Input Invoices.
In case & situation where E-Invoice is required to be generated but not made or updated but only normal Tax Invoice is prepared, connected goods, if dispatched, will be considered as without Invoice and subject to penal provisions covered by Section 122 of the CGST Act.
We are of the view that more we adapt our systems towards automation of our procedures to bring them in line with contemporary laws & procedure applicable for preparation of E-Invoice, Delivery Challan, E-Way Bills, more we will be able to control errors / lapses and thus saving our significant time & efforts from penal provisions being applied to the goods subject matter of movement and conveyance carrying such goods.
Readers are welcome to offer their views and share their queries, if any on the subject that we will endeavor to reply within due time…