130.1 Circumstances under which goods can be confiscated and penalty can be levied

Question-1 [ICSI-P-J21-O-4A(iii)-5]

What are the circumstances under which goods can be confiscated and penalty can be levied under CGST Act 2017?

Answer

Circumstances under which Goods can be confiscated and penalty can be levied:

As per section 130 of the CGST Act, 2017, the goods are liable for confiscation and any person shall be liable to penalty in the following cases:

(1) On supply or receipt of goods in contravention of provisions of the Act or rules leading to evasion of tax.

(2) On not accounting for any goods which are liable to pay tax under the Act.

(3) On supply of goods liable for taxation under the Act, without having applied for registration.

(4) Contravention of any of the provisions of the Act or rules with an intention to evade payment of tax.

(5) Uses any conveyance or means of transport for carriage of goods in contravention of provisions of this Act or rules made thereunder, unless the owner proves that it was used without his knowledge or connivance.

All such goods or conveyances shall be liable for confiscation and person shall be liable for penalty under section 122 of the Act.

130.2.1 Option to pay fine in lieu of Confiscation goods

Quesiton-1 [ICAI-F-M18-5b-5]

From the details given below determine the maximum amount of fine in lieu of confiscation leviable under section 130 of CGST, Act, 2017 on:

(i) The goods liable for confiscation.

(ii) On the conveyance used for carriage of such goods.

Details are as follows:

You are also required to explain relevant legal provisions in brief.

Answer

(i) As per section 130(2) of the CGST Act, 2017, in case of goods liable for confiscation, the maximum amount of fine leviable in lieu of confiscation is the market value of the goods confiscated, less the tax chargeable thereon.

Therefore, the fine leviable = Rs.20,00,000 – Rs.3,60,000 = Rs.16,40,000

The aggregate of such fine and penalty leviable shall not be less than the [1][penalty equal to 100% of the tax payable on such goods]

(ii) In case of conveyance used for carriage of such goods and liable for confiscation, the maximum amount of fine leviable in lieu of confiscation is equal to tax payable on the goods being transported thereon [Third proviso to section 130(2) of the CGST Act, 2017].

Therefore, the fine leviable = Rs.3,60,000

Quesiton-2 [ICAI-F-N19-5b-5]

Neurological Systems Private Limited has been subject to confiscation of goods on the ground that it has not accounted for the goods that are liable to tax under the CGST Act, 2017. The directors would like to know from you as to how such goods are to be released from the Department. You are required to advise the directors regarding the provisions of law on this matter.

Answer

Option-1

To get the confiscated goods released from the Department, the directors of Neurological Systems Private Limited are advised as under:-

Neurological Systems Private Limited shall get an option to pay redemption fine in lieu of confiscation.

Such fine should be less than or equal to ≤ [Market value of the goods confiscated – Tax chargeable thereon]

The aggregate of such fine and penalty leviable shall not be less than the [2][penalty equal to 100% of the tax payable on such goods]

Neurological Systems Private Limited can get its confiscated goods released on payment of such redemption fine plus the tax, penalty and charges payable in respect of such goods.

Alternative

The matters on which the GST Council may make recommendations under Article 279A of the Constitution of India are as under:-

(i) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in GST;

(ii) the goods and services that may be subjected to, or exempted from GST;

(iii) model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of inter-State trade or commerce and the principles governing the place of supply;

(iv) the threshold limit of turnover below which goods and services may be exempted from GST;

(v) the rates including floor rates with bands of GST;

(vi) any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;

(vii) special provision with respect to Special Category States

(viii) the date on which the GST be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.

(ix) any other matter relating to the GST, as the Council may decide.

Note: Any five points may be mentioned.