S.130 CGST | GST Law Does Not Allow Provisional Release of Goods Seized During Confiscation Proceedings: Kerala High Court

The Kerala High Court on Friday held that GST authorities cannot release seized goods during confiscation proceedings merely because the trader pays the fine proposed in a show cause notice.

Justice Ziyad Rahman A.A. ruled that Section 130(2) of the Central Goods and Services Tax Act permits payment of a fine in lieu of confiscation only after a final confiscation order is passed. “Mere notice to initiate confiscation proceedings will not amount to authorisation for confiscation,” the court said.

Section 130 deals with confiscation of goods and conveyances. Sub-section (2) states that whenever confiscation is “authorised,” the adjudicating officer must give the owner an option to pay a fine instead of confiscation. The Court held that authorisation arises only after adjudication. “Authorisation would come into force when the final order of confiscation is passed after following the procedure contemplated in this regard,” the court held.

Further, it noted, "It is also to be noted in this regard that, as per sub-section 5 of section 130 of the CGST Act, where any goods or conveyance are confiscated under the Act, the title of such goods or conveyance immediately vests with the Government. Thus, the authorization comes into effect only upon final order of confiscation is passed and until such an order is passed, the proceedings that are undergoing can only be a proposal to confiscate the goods, which is falling short of an authorization to confiscate"

In the present case, GST officials intercepted a vehicle transporting copper scrap belonging to Authentic Metals, a registered scrap dealer. After inspection, the department issued a notice in Form GST MOV-10 proposing confiscation of the goods and the vehicle.

It proposed a fine of Rs. 18,92,053 in lieu of confiscation. The firm paid the entire proposed fine and sought release of the goods pending adjudication.

The petitioner contended that once the proposed fine was paid under Section 130(2), the goods were liable to be released. The State opposed the plea. It argued that the provision does not contemplate provisional release at the notice stage and applies only after a final confiscation order.

Accepting the State's contention, the Court held that Section 130 contains no reference to provisional release.

“Nowhere in sub-section (2) of Section 130, any reference with regard to the provisional release of the goods is made,” it observed.

It further held, “The only conclusion possible is that what is contemplated under sub-section (2) of Section 130 is a release by paying fine in lieu of confiscation and the same has to be invoked within the time limit contemplated under Section 130(7), i.e., within three months from the date of issuance of the confiscation order.”

The court added that where the statute expressly provides provisional release elsewhere, such as under Section 67(6), it cannot be implied into Section 130. “The power of provisional release being specifically provided under Section 67(6), cannot be extended to proceedings under Section 130 in the absence of an express statutory mandate,” it said.

However, the court found that the department had continued to retain the goods without passing a valid detention order under Section 129, which governs detention of goods in transit. The Act requires a formal detention order. In this case, none had been issued.

Referring to Article 300A of the Constitution, the Court said no one can be deprived of property except by authority of law. Since no valid detention order under Section 129 had been issued, the continued retention of the goods was unsustainable.

Accordingly, although provisional release under Section 130(2) was refused, the department could not lawfully keep the goods. The Court directed that they be released forthwith on the petitioner furnishing a simple bond.