Amendments proposed in Section 129 and 130 of the CGST Act, 2017 notified w.e.f. January 01, 2022

[CA Bimal Jain]

Background:

The Hon’ble Finance Minister, in Union Budget 2021-22, proposed changes vide the Finance Bill, 2021, that amends the Central Goods and Services Tax Act, 2017 (“the CGST Act”) with respect to amendments in Section 129 and 130 of the CGST Act.  Accordingly, amended Bill was passed in Rajya Sabha, the upper house, and it received presidential assent vide Finance Act, 2021.

Notification:

The CBIC vide Notification No. 39/2021–Central Tax dated December 21, 2021 notified the below mentioned amendments made vide Section 117 and 118 of the Finance Act, 2021 w.e.f. January 01, 2022:

Current provisions	Notified provisions
Clause (a) & (b) to be substituted in sub section (1) of Section 129 - Detention, seizure and release of goods and conveyances in transit – Section 117 of the Finance Act, 2021
Sub-section (1)(a) of Section 129:  “(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;”	Sub-section (1)(a) of Section 129: “(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.”
Sub-section (1)(b) of Section 129: (b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon 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 tax and penalty;	Sub-section (1)(b) of Section 129: (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;
Section 129(2): “The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.”	Section 129(2) shall be omitted “The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.”
Section 129(3): “(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).”	Sub-section (3) of Section 129: “(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)”
Section 129(4): “No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.”	Section 129(4): “No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.”
Sub-section (6) of 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 sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130: Provided 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 seven days may be reduced by the proper officer.”	Sub-section (6) of Section 129: “(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.”
Amendment in Section 130 - Confiscation of goods or conveyances and levy of penalty - Section 118 of the Finance Act, 2021
Sub-section (1) of Section 130: “(1) Notwithstanding anything contained in this Act, if any person- …………..”	Sub-section (1) of Section 130: “(1) Where, if any person- …………..”
Second Proviso to Section 130(2): “Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129”	Second Proviso to Section 130(2): “Provided further that the aggregate of such fine and penalty leviable shall not be less than the penalty equal to hundred per cent. of the tax payable on such goods”
Sub-section (3) of Section 130: “Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.”	Sub-section (3) of Section 130 shall be omitted. “Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.”

Discussion and Comments:

Amendments in Section 129 and 130 of the CGST Act:

Section 129 of the CGST Act, which deals with the detention, seizure and release of goods and conveyances in transit, has been amended in a following manner:

• Enhanced penalty (previously penalty and tax) under Section 129(1)(a) & (b):

Existing provision	Notified amendment
When owner comes forward [Sec 129(1)(a)]:
Taxable goods- Tax + penalty equal to 100% of tax payable Exempted goods – Lowest of 2% of the value of goods or ₹ 25,000/-	Taxable goods – Penalty equal to 200% of tax payable Exempted goods – Lowest of 2% of the value of goods or ₹ 25,000/-
When owner does not come forward [Sec 129(1)(b)]:
Taxable goods – Tax + penalty equal to 50% of value of goods reduced by tax paid. Exempted goods – Lowest of 5% of the value of goods or ₹ 25,000/-	Taxable goods – Penalty equal to higher of 50% of value of goods or 200% of the tax payable on such goods. Exempted goods – Lowest of 5% of the value of goods or ₹ 25,000/-

• Section 129(2) has been omitted: That means, the goods seized shall not be released on provisional basis upon execution of a bond and furnishing security and the penalty imposed by the officer will have to be paid in cash by the taxpayer.
• Period of issuance of notice and passing of order under Section 129(3) of the CGST Act: The proper officer detaining/seizing the goods, have to issue a notice (MOV-07) within 7 days specifying the penalty payable and pass an order (MOV-09) within next 7 days after service of such notice, whereas earlier there was no such time limit.
• Determination of penalty: In the amendment to Section 129(4) of the CGST Act, no penalty shall be determined without giving opportunity of hearing, where penalty is payable on detention or seizure of goods or conveyance.

It is to be noted that tax and interest shall not be demanded after the amendment in law for release of goods and conveyance.

• Delinking Section 129 from Section 130: Amendment in Section 129(6) of the CGST Act delinks the proceedings under Section 129 of the CGST Act relating to ‘detention, seizure and release of goods and conveyances in transit’, from the proceedings under Section 130 of the CGST Act relating to ‘confiscation of goods or conveyances and levy of penalty’.

Earlier the provision was if person does not pay tax and penalty within 14 days of seizure, the conveyance and goods detained were liable for confiscation as per Section 130 ibid. But, after this amendment, the goods or conveyance detained or seized shall become liable to be sold or disposed off in the manner prescribed in case the payment of imposed penalty is not made within 15 days from the date of receipt of copy of the order imposing such penalty.

Further, conveyance used for transportation of the goods may be released on payment of penalty or INR 1 Lakh whichever is less.

Corresponding changes for delinking Section 129 and 130 of the CGST Act are also made in Section 130 of the CGST Act.

The Notification can be accessed at: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-39-central-tax-english-2021.pdf

(Author can be reached at [email protected])