Transit Checks of Goods & Conveyance Under CGST Act 2017 GST Series – Part 33
1. This article covers provisions relating to inspection, seizure, and detection of goods and conveyances carrying the goods prescribed vide section 68, section 129 of CGST Act read with Rule 138 of CGST Rules 2017.
2. Statutory Provisions :
| Section 68(1) | The Central Government may require the person in charge of a conveyance carrying any consignment of goods to carry prescribed documents or devices. Such a requirement of carrying documents or devices may be specified for a value exceeding a certain amount. |
| Rule 138(A)(1) | The person in charge of a conveyance carrying a consignment of goods value exceeding Rs 50000/- shall carry the followings:-
(a) The invoice or bill of supply or delivery challan, as the case may be. (b) A copy of E Way Bill (EWB) in physical form or the E Way Bill Number (EBN) in Electronic form. The Commissioner may notify that E Way Bill is required to be carried in device form ie Mapped to a Radio Frequency Identification Device (RFID) embedded on the conveyance |
| Rule 138(A)(5) |
Notwithstanding anything contained in clause (b) of sub-rule 138(A)(1), where circumstances so warrant, the Commissioner may, by notification, require the person-in-charge of the conveyance to carry the following documents instead of the e-way bill:- (a) Tax invoice or bill of supply or bill of entry or (b) A delivery challan, where the goods are transported for reasons other than by way of supply |
| Rule 138(A)(4) | The Commissioner may, by notification, require a class of transporters to obtain a unique Radio Frequency Identification Device and get the said device embedded on to the conveyance and map the e-way bill to the Radio Frequency Identification Device prior to the movement of goods. |
| Proviso to Rule 138(A)(1) | E Way Bill indicated at subsection (b) of Sec 138(A)(1) is not required in case of movement of goods by rail or by air or by vessel. |
| Proviso to Rule 138(A)(1) | In the case of Imported goods, the person in charge of the conveyance shall carry a copy of the bill of entry filed by the importer of such Goods. The Number & date of such Bill of Entry shall be indicated in Part A of Form GST EWB 01 |
3. Validation of the documents :
| Section 68(2) | The details of documents required to be carried under sub-section (1) shall be validated in a prescribed manner. |
| Rule 138(A)(2) |
E-Invoice A registered person may obtain an Invoice Reference Number (IRN) in FORM GST INV-1 from the common portal by uploading the tax invoice on the said portal He may produce IRN in lieu of tax invoice for verification and such number shall be valid for thirty days from the date of uploading. |
| Rule 138(A)(3) | Where the registered person uploads the invoice under the E-Invoicing system as per sub-rule (2), the information in Part A of E Way Bill shall be auto-populated by the common portal based on the information furnished in Form GST-INV 01 |
4. Verification & Interception of Conveyance :
| Rule 138 B(3) | The physical verification of conveyances shall be carried out by the proper officer as authorized by the Commissioner or an officer empowered by him in this behalf. |
| Proviso to Rule 138(B)(3) | Provided that on receipt of specific information on evasion of tax, physical verification of a specific conveyance can also be carried out by any other officer after obtaining the necessary approval of the Commissioner or an officer authorized by him on this behalf |
| Rule 138 B(1) | The Commissioner or an officer empowered by him in this behalf may authorize the proper officer to intercept any conveyance to verify the e-way bill in physical or electronic form for all inter-State and Intra State movement of goods |
| Rule 138 B(2) | The Commissioner shall get Radio Frequency Identification Device readers installed at places where the verification of movement of goods is required to be carried out and verification of movement of vehicles shall be done through such device readers where the e way bill has been mapped with the said device. |
5. Inspection and Verification of Goods :
| Section 68(3) | Where any conveyance carrying a consignment of goods of value exceeding Rs 50000/- is intercepted by the proper officer at any place, he may require the person in charge of the said conveyance to produce the documents and devices for verification, and the said person shall be liable to produce the same and also allow the inspection of goods. |
| Rule 138 C(1)
Explanation to Rule 138 C(1) |
A summary report of every inspection of goods in transit shall be recorded online by the proper officer in Part A of FORM GST EWB -03 within twenty-four hours of the inspection The final report in Part B of FORM GST EWB -03 shall be recorded within three days of such inspection. The period of twenty-four hours or, as the case may be, three days shall be counted from the midnight of the date on which the vehicle was intercepted. |
| Proviso to Rule 138 C(1) | Where the circumstances so warrant, the Commissioner, or any other officer authorized by him, may, on sufficient cause being shown, extend the time for the recording of the final report in Part B of FORM EWB -03 for a further period not exceeding three days. |
| Rule 138 C(2)
|
Where the physical verification of goods being transported on any conveyance has been done during transit at one place within the State or in any other State, no further physical verification of the said conveyance shall be carried out again in the State, unless specific information relating to evasion of tax is made available subsequently. |
6. Detention of Goods & Conveyance
| Section 129 (1) | Notwithstanding anything contained in this Act, where any person transports any goods in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance are used as a means of transport and documents relating to such goods and conveyance shall be liable to detention or seizure. |
| No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.- Proviso to sec 129(1) | |
7. Issuance of Notice
| Section 129(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 |
8. Release of goods and conveyance on payment of Tax and Penalty: Notwithstanding anything contained in this Act, all the goods and conveyance detained and seized shall be released on payment of tax and penalty as indicated below :
| Taxable Goods | Exempted Goods | ||
| Section 129(1)(a) | The owner of the goods come forward for payment of tax & penalty | Applicable tax + penalty equal to 100 % of the applicable tax payable | 2% of the value of goods or Rs 25000/-, whichever is less |
| Section 129(1)(b) | The owner of the goods does not come forward for payment of tax & penalty | Applicable tax + penalty equal to 50 % of the value of the goods – tax amount paid thereon | 5% of the value of goods or Rs 25000/-, whichever is less |
| Section 129(1)(c) | Upon furnishing a security equivalent to the amount payable under Sec 129(1)(a) & (b) above, the goods & conveyance shall be released. | ||
| Section 129(5) | On payment of the amount referred in section 129(1)(b), all proceedings in respect of the notice specified in section 129(3) shall be deemed to be concluded. | ||
9. Release of Goods on the provisional basis
| Section 129(2)
Section 67(6) |
The provisions of Section 67 (6) shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
The good seized shall be released on a provisional basis on the execution of bond and furnishing of security or payment of tax, interest and penalty. |
10. Failure to pay Tax & Penalty
| Section 129(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 section 129 (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130 i.e. Confiscation of goods & conveyance & levy of penalty. |
| where the detained or seized goods are perishable or hazardous or are likely to depreciate with passage of time, the said period of fourteen days may be reduced by the proper officer proviso to Section 129(6) | |
| For Section 129(6) of the Act, it would not be necessary for the department to establish any intention to evade payment of tax. If the tax and penalty, as determined under Section 129, is not deposited within the statutory period, then the goods and the conveyance shall be liable to be put to auction and the sale proceeds shall be deposited with the Government. | |
11. Procedure for interception of conveyances The procedure for interception of the conveyance for inspection of goods in movement, detention and release as prescribed vide CBEC Circular No. 41/15/2018 dated 13.04.2018 is summarized below:-
| Sl | Actions to be taken by the officer | Prescribed Forms |
| (a) | Record statements of the driver of the vehicle | GST MOV-01 |
| (b) | Issue an order for physical verification of the conveyance, goods, and documents and to stop and park the vehicle at the place mentioned in the order | GST MOV-02 |
| (c) | Preparation of report within 24 hours of the issuance of GST MOV-02, and upload on the portal | Part A of GST EWB-03 |
| (d) | Physical verification shall be completed within 3 days of issuance of GST MOV-02. However, if the same cannot be completed, written permission shall be obtained from Commissioner to extend the time beyond 3 days | GST MOV-03 |
| (e) | Report of completion of Physical verification shall be issued to the driver | GST-MOV-04 |
| (f) | Such a final report shall be updated by the officer on the common portal within 3 days | Part B of GST EWB-03 |
| (g) | Release order shall be issued if no discrepancies are found and release the vehicle | GST MOV-05 |
| (h) | If an officer wants to detain goods and vehicle, an order of detention shall be issued | GST MOV-06 |
| (i) | Notice along-with above order shall be issued for the detention | GST MOV-07 |
| (j) | On receipt of the above-said notice, the owner of the goods may move ahead as per the following:
The owner accepts the tax and penalty as per notice(Section-129) He can deposit the amount of tax and penalty by debiting Electronic Cash Ledger or Credit Ledger (relevant forms) OR he can submit a bond along with security in form of a bank guarantee Order for releasing of Goods and conveyance shall be passed |
GST PMT 10 to 06 or DRC 03
GST MOV-08 GST MOV-05 |
| (k) | The owner does not accept the tax and penalty(Section-129) > Reply should be filed along with the objection
Speaking order shall be passed by the officer and upload on the common portal Order for releasing of Goods and conveyance shall be passed after-tax and penalty are paid |
GST MOV-09
GST MOV-05 |
| (l) | If the above-stated tax penalty is not deposited within 14 days of issuance of an order of detention, Notice for the confiscation of Goods and Conveyance shall be issued under section-130 | GST MOV-10 |
| (m) | Reply to the notice shall be submitted by the owner of the goods and conveyance | |
| (n) | Final Order(s) of Confiscation of Goods and Conveyance shall be passed and served upon the owners of goods and conveyance and also shall be uploaded on the common portal. A common order can also be passed by the officer to the owner of goods and owner of conveyance. | GST MOV-11 |
Case Laws: There is n number of judgments pronounced by Hon’able courts against writ filed by the taxpayers in case of the inspection, seizure, detention of goods and conveyance carrying goods. The recent two case laws are being discussed herewith.
(a) Perishable Goods in transit can’t be Seized, if the person in charge of the conveyance carrying goods (driver) produce valid E-way Bill & Invoice and paid applicable Taxes & Penalty: In Venkateshvara Logistics Fleet Owners and Transport Contractors Vs Assistant Commissioner (Karnataka High Court), the conveyance carrying perishable goods were detained and seized. The proper officer had reason to believe that the invoice produced by the driver was a bogus invoice and the supplier issuing such an invoice is non-existence.
It is held by the Karnataka High Court that the respondent was not justified in seizing the perishable goods in transit, more so when the goods had suffered tax and penalty
However, liberty is reserved for the proper authority under the CGST Act to continue the proceedings initiated under Section 67 and determine the amount of tax payable on the previous supplies made under Section 74 or initiate any penal action under Section 132 of the CGST Act against the supplier or the registered recipients for the alleged fraudulent availing of input tax credit or the wrongful generation of invoices.
(b) Undervaluation of good in the invoice could not be a ground for the detention of the goods and vehicle for a proceeding to be drawn under Section 129 read with Rule 138 :
P. Sugandh Ltd. Vs State Of Chhattisgarh (Chhatisgarh High Court): The Assessee company, the manufacturers of ‘Pan Masala and Tobacco Products’ dispatched goods to its customer vide Maxi Truck Plus belonging to the transporter Shyam Transport Company.
The vehicle was intercepted by the officials of the Department and asked for the details of the consignment. Despite the Incharge of the conveyance producing the necessary invoice bill and the e-way bill, the authorities seized the vehicle and the goods on the grounds of there being discrepancies in the valuation of the goods and thereafter detained the vehicle and the goods.
Immediately, thereafter assessee moved an application for release of the vehicle. Authorities had passed the impugned order whereby they had assessed the tax payable on the goods as also the penalty applicable to the said assessment made to release of the goods and the vehicle.
The issue raised in this case was whether the goods undervaluation of goods in the invoice could be the ground for the detention of goods under Section 129 of the Central Goods and Service Tax (CGST) Act, 2017 or not?
It was held by Chhatisgarh High Court that under the valuation of good in the invoice could not be a ground for the detention of the goods and vehicle for a proceeding to be drawn under Section 129 read with Rule 138. Therefore, the order passed under Section 129 and the order of demand of tax and penalty both being unsustainable deserved to be and was accordingly set-aside/quashed. Authorities were forthwith directed to release the goods belonging to the assessee based on the invoice bill as well as the e-way bill.
However, the quashing of the impugned order by itself would not preclude the State Authorities from initiating appropriate proceedings against the assessee for the alleged act of undervaluation of the goods as compared to the MRP on the product in accordance with the law.
Note: GST Series Part 34 will cover the provisions relating to Confiscation of goods & Conveyance & level of penalty
The Author can be approached at caanitabhadra@gmail.com
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