Whether a person can be deprived of his right to file an appeal against the proceedings, if he makes voluntary payment of penalty u/s 129(1)(a) of CGST Act, 2017?
Section 129 and 130 of the Central Goods and Services Act, 2017 (‘CGST Act, 2017’) are two separate sections, the former dealing with detention, seizure and release of goods and conveyance in transit and later dealing with Confiscation of goods and conveyance and levy of penalty. These Sections were amended by section 117 and 118 of Finance Act 2021 and amended section were made applicable from 01.01.2022 vide Notification No. 39/2021-Central Tax, dt. 21.12.2021.
The relevant amendments in Section 129 of the CGST Act, 2017 made by Section 117 of the Finance Act, 2017 are as under
[In section 129 of the Central Goods and Services Tax Act,–
(i) in sub-section (1), for clauses (a) and (b), the following clauses shall be substituted, namely:–
“(a) on payment of penalty equal to two 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 penalty;
(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, 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 penalty;”;
(ii) sub-section (2) shall be omitted;
(iii) for sub-section (3), the following sub-section shall be substituted, namely:-
“(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).”;
(iv) in sub-section (4), for the words “No tax, interest or penalty”, the words “No penalty” shall be substituted;
(v) for sub-section (6), the following sub-section shall be substituted, namely:-
“(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:
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.”.]
The particular amendments in Section 129(1) of the CGST Act, 2017 related to payment of penalty in case of Detention, Seizure and release of goods & conveyance while they are in transit, are as under-
|
Case |
Nature of Goods | Old provisions | Amended provisions |
| Where the owner of the goods comes forward for payment of such penalty | Taxable Goods | Applicable tax and 100% penalty | Penalty equal to 200% of tax payable on such goods |
| Exempted Goods | Penalty 2% of the value of goods or Rs. 25000, whichever is lower | Penalty 2% of the value of goods or Rs. 25000, whichever is lower | |
| Where the owner of the goods does not come forward for payment of such penalty | Taxable Goods | Applicable tax and penalty equal to 50% of the value of goods | Penalty equal to 50% of the value of such goods or 200% of the tax payable on such goods whichever is higher |
| Exempted Goods | Penalty 5% of the value of goods or Rs. 25000, whichever is lower | Penalty 5% of the value of goods or Rs. 25000, whichever is lower |
By the aforesaid amendment, only penalty has to be paid to release of goods and tax is required to be paid at the time of filling relevant GSTR-1 and GSTR-3B.
Whether a person can be deprived of his right to file an appeal against the proceedings, if he makes voluntary payment of penalty u/s 129(1)(a) of CGST Act, 2017?
The only point that arises for consideration in the following case is whether a person who opts to make payment in terms of Clause (a) of Sub-Section (1) of Section 129 of the Central Goods & Services Tax Act / State Goods & Services Tax Act (hereinafter referred to as the ‘CGST/SGST Acts’) to get goods/conveyance/documents detained or seized in proceedings under Section 129 released is deprived of his right to file an appeal against the proceedings.
While the petitioners in the following case contend for the position that they are not deprived of such right, the State contends that on account of the stipulation in sub-section (5) of Section 129 of the CGST/SGST Acts, on payment of amounts under sub-section (1), all proceedings which are the subject matter of a notice under sub-section (3) of Section 129 “shall be deemed to be concluded”.
The Hon’ble High Court of Kerala in Hindustan Steel and Cement Vs. Assistant State Tax Officer & Ors (W.P.C. No. 17454 of 2022 dated: 18.07.2022) held that even in cases where tax or penalty levied U/s. 129 of the CGST Act, 2017 was paid by a taxable person he can file an appeal under section 107 of the CGST Act, 2017.
The Hon’ble Court considered the contention raised above. The relevant statutory provisions may be noticed. Sections 129 (1) (a), (3) and (5) of the CGST/SGST Acts, (as they stood prior to amendment w.e.f from 1.1.2022) read as under-
“(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)…….
(c) …….
(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)
(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.”
The provisions of Section 129 of the CGST/SGST Acts provide for the detention, seizure and release of goods, conveyance and documents. It provides that when a person transports any goods or stores any goods while they are in transit in contravention of the provisions of the Act of the Rules made thereunder, such goods, documents and conveyance used as a means of transport shall be liable to detention or seizure and also provides for the procedure to be followed for release of goods following such detention or seizure.
As already noticed, Section 129(1)(a) provides that where the person who suffers the order on detention makes payment of tax and penalty, the goods shall be released. Section 129(1)(c) gives an option to a person suffering an order of detention to provide security instead of making payment of tax and penalty as provided for in Section 129(1)(a).
However, the provisions of sub-section (3) of Section 129 contemplate the issuance of a notice and the passing of an order. A reading of sub-section (3) suggests to me that whether the person suffering the detention chooses to make payment under Section 129(1)(a) or chooses to provide security in terms of Section 129(1)(c), the officer detailing or seizing the goods or conveyance has to issue a notice specifying the tax and penalty payable.
Rule 142(5) of the CGST/SGST Rules provides as follows: –
“A summary of the order issued under section 52 or section 62 or section 63 or section 64 or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded electronically in Form GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.”
Clause (h) and (v) of the Circular No.41/15/2018-GST dated 13.04.2018 read as follows: –
“(h) Where the owner of the goods or any person authorized by him comes forward to make the payment of tax and penalty as applicable under clause (a) of sub-section(1) of Section 129 of the CGST Act, or where the owner of the goods does not come forward to make the payment of tax and penalty as applicable under clause (b) of sub-section(1) of the said Section, the proper officer shall, after the amount of tax and penalty has been paid in accordance with the provisions of the CGST Act and the CGST Rules, release the goods and conveyance by an order in FORM GST MOV-05.
Further, the order in FORM GST MOV-09 shall be uploaded on the common portal and the demand accruing from the proceedings shall be added in the electronic liability register and the payment made shall be credited to such electronic liability register by debiting the electronic cash ledger or the electronic credit ledger or the concerned person in accordance with the provisions of Section 49 of the CGST Act.
(v) A summary of every order in FORM GST MOV-09 and FORM GST MOV-11 shall be uploaded electronically in FORM GST-DRC-07 on the common portal.”
A reading of sub-section (3) of Section 129 of the CGST/SGST Acts, the provisions of Rule 142 referred to above and the provisions of the circular, cumulatively, compel me to hold that whether or not a person opts to make payment under section 129(1)(a) or to provide security under Section 129(1)(c), the responsibility of the officer to pass an order under sub-section (3) of Section 129 and to upload a summary of the order/demand in Form MOV 7 continues.
The provisions of sub-section (5) or Section 129 which were pointed out by the learned Senior Government Pleader only contemplate that the procedure for detention on seizure of goods or documents or conveyances come to an end and it is always open to the person who suffers proceedings under 129 of the CGST/SGST Acts to challenge those proceedings if he feels that the demand has been illegally raised on him.
This can be the only reasonable interpretation that can be placed on the provisions referred to above. Any other interpretation would clearly violate Article 265 of the Constitution of India. Further, Section 107 of the CGST Act is widely worded and provides that any person aggrieved by any decision, or order passed under the CGST/SGST Acts or Union Territory Goods and Services Tax Act, by an adjudicating authority, may appeal to such appellate authority as may be prescribed, within three months from the date on which such decision or order is communicated to such a person.
It is obvious that the learned counsel for the petitioners in these cases is correct and contenting that whether or not a payment is made under Section 129(1)(a) or security is provided under Section 129 (1) (c), the person who is the subject matter of proceedings under section 129 of the CGST Act has the right to challenge those proceedings, culminating in an order under sub-section (3) of Section 129, before the duly constituted Appellate Authority under Section 107 of that Act.
The fact that the culmination of proceedings in respect of a person who seeks to make payment of Tax and Penalty under Section 129(1)(a) does not result in the generation of a summary of an order under Form DRC-07 cannot result in the right of the person to file an appeal under Section 107 being deprived. The fact that the system does not generate a demand or that the system does not contemplate the filing of an appeal without a demand does not mean that the intention of the legislature was different.
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