Can goods confiscated be released on furnishing of a bond/security/bank guarantee?
Goods in transit must be accompanied by prescribed documents without which they may be detained and confiscated. When any person transports any goods in contravention to the GST Act then the goods, related documents, and the vehicle carrying them will be seized. The goods will be released only on payment of tax and penalty. Goods and conveyance will be detained/seized only after giving an order of detention to the person transporting the goods. On detaining, the tax officer will issue a notice mentioning the tax payable and pass an order for payment of tax and penalty. 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, then the goods will be confiscated. The time of 7 days will be reduced in case of perishable or hazardous goods.
However, can such seized goods be returned on furnishing of a bond/security/bank guarantee? Let us refer to the case of M/S Jvg Super Cargo Service vs The State Tax Officer (Rajasthan HC) (2020) to find an answer to this question.
Facts of the Case:
- Petitioner was a transporter of the goods and his vehicle along with goods was confiscated.
- Petitioner had filed an appeal which was rejected. Against which although a second appeal lied, however, the petitioner has approached the High Court for release of vehicle and against its auctioning.
What was the contention of the Revenue Department?
- The revenue department relied on the judgment passed by Supreme Court in The State of Uttar Pradesh & Ors. Vs. M/s Kay Pan Fragrance Pvt. Ltd, where it was submitted that if the petitioner wanted an interim custody of the vehicle, which was confiscated, Rule 140 of the CGST Rules, 2017 was applicable, which could be invoked.
- The revenue authorities had no objection if the petitioner complied with the provision of Rule 140 of the CGST Rules and if the bank guarantee in terms of Rule 140 was submitted, the revenue department would release the vehicle.
What was the contention of the Petitioner?
- Petitioner submitted that he was not owner of the goods and therefore, he was not liable to submit the bank guarantee for the confiscated goods and at best it could only be required for the purpose of vehicle.
- Petitioner further submitted that since the vehicle was confiscated only on account of goods, he was not even liable to submit the bank guarantee relating to the vehicle and it should be released forthwith as he has complied with the provisions and produced all the 14 different owners of the goods.
What are the relevant provisions of law?
According to Rule 140 of the Central Goods and Service Tax Rules, 2017, the seized goods may be released on a provisional basis upon execution of a bond for the value of the goods in FORM GST INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. For the purposes of the rules under the provisions of this Chapter, the “applicable tax” shall include central tax and State tax or central tax and the Union territory tax, as the case may be and the cess, if any, payable under the Goods and Service Tax (Compensation to State) Act, 2017.
In case the person to whom the goods were released provisionally fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest and penalty and fine, if any, payable in respect of such goods.
Observations of the High Court (HC)
- At the present stage, admittedly the petitioner claimed himself to be only the owner of the vehicle as a transporter and had shown his disclaimer on the goods.
- In view thereof, the revenue department would be free to auction the goods in terms of the Rules.
- However, if the petitioner submitted the bank guarantee in terms of Rule 140, relating to the valuation of the vehicle, the revenue department would, upon satisfaction, release the vehicle to the petitioner.
- As owners of the goods were not presently before the court, no order in this regard was required to be passed.