What triggered Section 129:
Section 129 comes into picture when any person who is incharge of a conveyance carrying goods then under the provisions of Section 68 of CGST Act, 2017 the proper officer during the transit of the goods can ask for the inspection of goods and if the officers found out any discrepancy in the documents or any other misshape then the proper officer u/s 129 can detain & seize the conveyance as well as the goods inside it.
What does Section 129 say?
Section 129 of CGST Act, 2017 begins with a non obstante clause which gives immense powers to the officers to detain and seize the goods, documents and the conveyance, when the goods are transported or stored during the transit. It becomes effective when there is a contravention of Provisions or Rules made thereunder.
Powers mandate to officers u/s 129 are so diabolical which can lead to severe damage to the genuine tax payer. Only procedural lapses or genuine clerical errors can lead to levy of penalty, to any dimension. Section 129 of the CGST/SGST Acts empowers the officers to levy 200% penalty upon detention and it does not require any such attempted evasion of tax or omission to account the subject transaction.
After amendment in Section 129 in recent Finance Bill, 2021 the horror of arbitrary power is going to be increase for the genuine tax payer as it does not distinguish between “BLACK and WHITE” (all I mean to say the contravention can be minor or major, advertent or inadvertent, section 129 does not make a distinction between various types of contraventions as far as the penalty is concerned).
129. (1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, ––
(a) on payment of the applicable tax and penalty equal to one hundred per cent.
of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;
(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the
value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;
(c) upon furnishing a security equivalent to the amount payable under clause (a)
or clause (b) in such form and manner as may be prescribed:
Provided that no such goods or conveyance shall be detained or seized without
serving an order of detention or seizure on the person transporting the goods.
(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.
(6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:
Provided 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 seven days may be reduced by the proper officer.
After Amendment made in Finance Bill, 2021
(a) on payment of penalty equal totwo hundred per cent. of the tax payable on such goods and, ………..
(2) Sub section has been deleted
“(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).
(4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
(6) 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 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):
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:
As we can see that Government had given the benefit by omitting the tax & interest amount but in the garb of deleting tax & interest they have increased the penalty from 100% to 200%. Infact, by making this amendment government had made sure that they get every penny in hard cash.
As it is a fact that ITC cannot be adjusted towards penalty amount but one can adjust ITC towards tax liability, therefore the brilliant GST council came up with the idea of 200% penalty amount in case of contravention of provisions of CGST Act and rules made thereunder. A complete win – win situation for the government.
Further, leaving no stone unturn to harass the genuine tax payer government has come up with next level plan by deleting Section 129(2) which means, that the goods seized shall not be released on provisional basis upon execution of a bond and furnishing security and the penalty imposed by the officer have to be paid in only cash by the taxpayer.
Another interesting twist in the story is by delinking of Section 129 with Section 130 of CGST Act. Earlier the provision was if person does not pay tax and penalty within 14 days of seizure, the conveyance and goods detained were liable for confiscation as per Section 130. But, after the amendment, the goods or conveyance detained or seized shall become liable to be sold or disposed of in the manner prescribed in case the payment of imposed penalty is not made within 15 days from the date of receipt of copy of the order imposing such penalty.
Henceforth, knowing the nature of departmental officials for using or (can I say abusing) the immense power they have u/s 129, now the genuine tax payer who had made an inadvertent mistake in his eway bill or any other genuine mistake the only remedy he has left is paying 200% of hard cash.
That’s how government is planning to recover from sluggish growth of GST revenue.