Seizure, Detention & Confiscation – For Goods in Transit

What is goods in transit?

Goods in transit refer to inventory items and other merchandise that are shipped by a vendor, but have not yet reached to the vendee.

Example

Ramesh (seller) sent goods to Suresh (purchaser) but the carriage in which goods were sent broke down. Ramesh recorded them as sales but as good were not received by Suresh he could not record them as purchases. These goods are recorded in accounting books as goods in transit.

A brief explanation of seizure, detention and confiscation

Seizure

Seizure is taking over of possession of the products by the department. A seizure is generated only after inquiry/examination that the products are liable to confiscation

Detention

Barring right of access to the owner of the products by a court order/notice is referred to as detention. Even after detention the possession of products remains with the owner. Detention shall be given once it is suspected that the products are prone to seizure.

Confiscation

Product confiscation is the ultimate act post complete evaluation. After confiscation, title, in addition to possession, passes out of the original owner’s hands and into the hands of the Govt Authority.

In every tax administration the provisions for review, Search, Seizure and Arrest are provided to shield the interest of real taxpayers (as the Tax evaders, by evading the tax, get associate degree unfair advantage over the real taxpayers) and as a deterrent for evasion.

These provisions are also needed to safeguard the Government’s legitimate dues. Thus, these provisions act as a deterrent and by checking evasion give tier playing field to real taxpayers.

It should be mentioned that the methods of examination, Search, Seizure, and Arrest are exercised, only in exceptional circumstances and as a lender of last resort, to protect the government Revenue.

REASONS FOR INSPECTION

(a) Non-disclosure of any transaction relating to the supply of goods or services or stock in hand.
(b) Claimed input tax credit more than that should have been claimed.
(c) Contravention of any provisions of the Act or the Rules to evade tax.
(d) Transport or storage of goods which escaped payment of tax or manipulating accounts or stocks which may cause evasion of tax.

Seizure can be done only after proper inspection.

PROCEDURE FOLLOWED FOR SEIZURE OF PRODUCTS IN TRANSIT

Goods in transit shall be detained or confiscated only after the person carrying the goods has been notified of such detention.

Upon detention, the tax officer shall issue a tax collectible notice and pass a tax and penalty payment order.

All liabilities under detention will be released upon payment of the tax and penalty.

If the owner doesn’t pay within seven days, then the products are going to be confiscated. The time of seven days are going to be reduced in case of decayable or hazardous goods.

Penal provisions for seized goods

The items, related papers, and the vehicle carrying them will be confiscated when anyone transports any goods in contravention of the GST Act.

The products will be discharged solely on payment of required tax and after exercise of all penal provisions. There can be 2 scenarios during this case:-

If the owner of the products comes forward — during this case, 100% penalty (equal to the number of tax) are charged.

If the owner doesn’t step forward — payment of applicable tax and penalty equal to the 50% of the value of goods reduced by the tax amount paid thereon will be charged.

Confiscation under GST

All goods and transportation are seized if someone:–

• Supplies / receives an item in breach of GST provisions with a motive to skip tax.
• The existence of the confiscated material can not be taken into account.
• Supplies any commodity without registration (even if it is responsible for registration).
• Violates tax evasion laws
• Uses any conveyance/vehicle to carry the item in violation of GST.

The onus of proof is on the owner, if I proves that the vehicle was used without his complete knowledge vehicle will not be confiscated.

In each of the above situations, the penalty would apply.

Before confiscation of the products, the tax officer must provide an option of paying a fine rather than confiscation.

Fine in lieu of confiscation

The minimum fine are is 100 percent tax if the owner comes forward and 50% of the worth of products before tax if the owner doesn’t step up.

The maximum fine is the market price of items before tax.

Fine in the process of confiscation shall not release the other relevant penalties. If one pays fine in the process of confiscation, specific taxes, fees, fines may still be due.

Order to confiscate goods or to move or impose penalties shall not be given without allowing the individual the opportunity to be heard

When seized, the goods shall become the property of the Govt. After the products are sold, three months will be granted to pay the confiscation fine.

Confiscation will not impact other GST penalties, i.e. all penalties and proceedings may still apply.