Seizure, Detention and Confiscation under GST

Last Update Date : April 30, 2019
Estimated Read Time: 5 min

It is important for all taxable persons under GST Act to know their rights and duties under the Act while carrying out their businesses. This new indirect system provides power to certain persons / officers to conduct inspection, search, seizure and arrests to safeguard the interest of genuine taxpayers and to trace and mitigate the revenue leakages.

Inspection under GST

Any transportation or movement of goods by a registered person worth exceeding Rs 50,000 must be accompanied by an e-Way bill. The required documents like e-Way bill and invoice must be carried out by the person in charge of the vehicle carrying goods exceeding Rs 50,000.

‘Inspection’ is a lenient provision than ‘search’. It enables officers to access any place of business or of a person involved in transporting goods or who is either an operator or an owner of a warehouse.

A Joint Commissioner (or an officer of higher rank) may have “reasons to believe” that in order to avoid tax, any person has committed the following mishaps:

  • Suppressed any transaction relating to the supply of goods or services or both or stock in hand
  • The excessive claim of ITC
  • Violated of any of the provisions of the Act or the Rules made thereunder
  • Any transporter or owner / operator of a warehouse or a godown or any other place has kept goods which have escaped tax payment or has kept accounts and/or goods in such a way as is likely to cause evasion of tax

In all such scenarios, a joint commissioner can authorise any other officer in FORM GSTINS-01 to inspect places of businesses of the taxable person or the transporter or owner / operator of the warehouse.

Inspection can be carried out only if there is written authorisation of an officer of the rank of Joint Commissioner or above. An officer of the Central Goods and Service Tax (CGST) department or State Goods and Services Tax department carries out an inspection once s / he gets the authority to do so.

Search and Seizure under GST

The provision of search and seizure also provides enough protection. It is different from “inspection” which means to investigate something. “Search” means to find something illegal. It is an action taken by Government / Departmental Officials. It is a careful examination of the person, place or object to find something concealed or to ascertain crime evidence. It can only be carried out under the valid and appropriate Written legal authority.

Either based on inspection results or other concerns leading to such action, Joint Commissioner of SGST / CGST or a superior officer can order for a “search” if he has “reasons to believe” –

  • There are goods which are liable for confiscation
  • Any document / book / other evidence which will be useful during proceedings is hidden somewhere

In either of the scenarios, officer or the one whom she / he authorised can search and seize the goods and documents.

Note: GST law has not defined the term ‘seizure’. However, it implies taking possession forcibly against the wishes of the owner on a legal basis.

Penalty on Goods Seized

The seized goods can be released only after paying tax, Interest and penalty.

  • If the owner of the goods comes forward to accept the concealment of goods or documents under the subject matter, a penalty equivalent to the amount of tax will be charged.
  • If the owner does not come forward to accept the concealment of goods or documents under the subject matter, 50% of the value of goods before tax will be charged as penalty.

(Please note that penalty amounts are different if the goods under the subject matter are exempted goods)

Hence, if the owner does not come forward, he has to pay a higher amount as penalty.

Seizure vs Detention – Basic Difference from GST Act Point of View

Further, the terms ‘seizure’ and ‘detention’ are not the same. Detention is not allowing the owner any access to seized documents or goods by a legal notice or legal order. Here, the ownership and possession of goods lie with the owner. On the other hand, Seizure is taking over or actual possession of the goods by the department. A seizure can take place only after an investigation which concludes that the goods are liable to confiscation.

To summarise, restriction to access the suspected goods is detention and possession of suspected goods is a seizure.

The legal difference is mentioned below:

  • When the suspected goods are liable to confiscation, detention order is issued. Here, ownership lies with the owner.
  • Conversely, Seizure can be made only on the reasonable belief drawn on the basis of inquiry / investigation that the suspected goods are liable to confiscation. Here, ownership does not lie with the owner.

Process of Detention

The process of detention is explained in the following steps

  • Only after issuing a detention order to the person transporting the goods, both goods and conveyance can be either seized or detained.
  • The tax officer will issue a notice mentioning the tax payable penalty on detaining.
  • An opportunity of being heard will be given.
  • On payment of the tax and penalty, all liabilities under detention will be discharged.
  • If the owner does not pay within 7 days, the goods will be confiscated (the time of 7 days will be reduced in case of perishable or hazardous goods).

Note: Though both terms are legally not the same (considering ownership of goods), the process of seizure and detention is almost identical.

Confiscation (Arrests) under GST

In accordance with section 130 of CGST / SGST Act, goods become liable to confiscation when any person does the following:

  • supplies or receives any goods in contravention of any of the provisions of this Act or rules made thereunder leading to evasion of tax;
  • does not account for any goods on which he is liable to pay tax under this Act;
  • supplies any goods liable to tax under this Act without having applied for the registration;
  • contravenes any of the provisions of the CGST / SGST Act or rules made thereunder with intent to evade payment of tax.
  • 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

Confiscation takes out ownership and possession of goods from the owner and gives it into the hands of government authority.

In the case of confiscation also, the penalty is applicable. Before confiscating the goods, the tax officer shall give an option to the owner to pay fine instead of confiscation. The amount of fine shall not exceed the market value of the goods less the tax charged thereon.

H&R Block India will help you solve any query regarding GST billing and return filing. Get in touch with us for a fast, smooth and hassle-free return filing experience.

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CA Ankita Mathur
CA Ankita Mathur
Ankita, a Big 4 alumna, is a tax expert at H&R Block (India) with vast experience in managing GST-related business services. An avid traveller, Ankita is a regular contributor to the CAclubindia and loves helping people understand about GST and helping companies be GST compliant.