Sections 129 and 130 of the Central Goods and Services Tax Act, 2017, have frequently raised problems. Section 129 provides for the detention, seizure and release of goods and conveyances in transit. Section 130 deals with the confiscation of goods or conveyances and the imposition of fines in lieu of confiscation.
Both sections have notwithstanding clauses, raising doubts as to their validity in relation to sections 73 and 74. There was also the question of whether section 130 is subject to section 129 or whether they are mutually exclusive. There was a doubt as to whether section 130 could even be invoked after goods were released under Section 129.
Joint director
Lakshmikumaran & Sridharan
In Synergy Fertichem Pvt Ltd v State of Gujarat, the high court held that the notwithstanding clauses validated sections 129 and 130 despite sections 73 and 74. Section 130 of the Act is not subject to section 129. The sections are mutually exclusive. There is no implication that confiscation proceedings can be brought only after the owner of the goods or the conveyance fails to pay the tax determined under section 129. Even if the goods or the conveyance are released on payment of taxes and penalties under section 129, the authorities may subsequently bring confiscation proceedings under section 130 should they find anything incriminating.
The court did not answer the question of whether tax needs to be paid again under section 129(1)(a) if tax has already been paid. The section provides that the applicable tax and a penalty equal to the tax payable must be paid before goods can be released. As the tax had already been paid, no tax was payable and no penalty incurred. The court said that the legislature should consider amending sections 129 and 130 to remove inconsistencies.
Amendments in the 2021 budget propose that section 129(1)(a) and (b) be replaced with:
(a) on payment of penalty equal to 200% of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to 2% of the value of the goods or ₹25,000, whichever is less, where the owner of the goods comes forward for payment of such penalty;
(b) on payment of penalty equal to 50% of the value of the goods or 200%. of the tax payable on such goods, whichever is higher, and in the case of exempted goods, on payment of an amount equal to 5% of the value of the goods or ₹25,000, whichever is less, where the owner of the goods does not come forward for payment of such penalty;
This settles the argument that a tax on tax-paid goods or without any supply violates article 246A of the constitution. The amendment will end disputes over the payment of tax twice for the same transaction in cases such as the transportation of tax-paid goods, and the use of the proper GST identity number. Disputes over penalties will continue in respect of tax-paid goods since the amount is based on the tax payable. It will be argued that no penalty is payable if tax has already been paid.
Amended section 129(6) delinks the proceedings under section 129 from those under section 130 by providing in section 129 itself for the recovery of penalties by disposing of goods and conveyance.
Amendments to section 130 remove the notwithstanding clause. The question is whether section 130 is now independent of sections 73 and 74. Further, section 130(3) is now omitted. This provided that where any fine in lieu of confiscation of goods or conveyance is imposed under sub- section (2), the owner of such goods or conveyance shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance. It is not clear whether proceedings under section 130 are final, or whether separate proceedings can be brought under sections 73 and 74. If so, there was no need to remove its notwithstanding effect. This should be dealt with before the enactment of the finance act.
There are larger issues as to the constitutional validity of section 129. It gives arbitrary and unrestricted power to detain goods. It imposes the 200% penalty regardless of the nature of the dereliction. In many cases goods and conveyances were unfairly seized even for minor infrac- tions. The owners of the goods had to go to court to obtain the release of their goods. These issues remain for later argument.
Surbhi Premi is a joint director at Lakshmikumaran & Sridharan
Lakshmikumaran & Sridharan
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India
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