lipped from: https://taxguru.in/goods-and-service-tax/sections-68129-130-respect-goods-transit-gst.html
Summary- The article examines the statutory framework governing inspection, detention, seizure, and confiscation of goods in transit under the GST regime, with a particular focus on Sections 68, 129, and 130 of the CGST Act, 2017. It explains the legal obligations relating to carriage of documents and e-way bills, the powers of “proper officers,” and the detailed procedural safeguards prescribed under the CGST Rules and CBIC Circulars.
The article highlights that Section 129 is a self-contained code dealing with detention and release of goods and conveyances for procedural or technical contraventions during transit, permitting release upon payment of prescribed penalty or furnishing of security. In contrast, Section 130 operates in a distinct field and can be invoked only where there is clear intent to evade tax, leading to confiscation and vesting of title in the Government.
Special emphasis is placed on the amendments introduced by the Finance Act, 2021, which consciously delinked Sections 129 and 130 and removed the applicability of provisional release under Section 67(6) for transit cases. The article also discusses CBIC circulars discouraging mechanical detention for minor discrepancies and stresses adherence to prescribed timelines and statutory forms.
Judicial developments, particularly the Gujarat High Court decision in Panchhi Traders v. State of Gujarat, are analysed to underline that confiscation is a drastic measure and cannot be resorted to on mere suspicion or technical lapses. The article concludes that GST authorities must strictly follow due process and invoke confiscation provisions only in genuine cases involving demonstrable tax evasion, ensuring proportionality and protection against arbitrary action.
Section 68 –Inspection of goods in movement
It is important to note that the Government has provided for inspection of goods in transit. This means that when goods are transported from one place to another, they may be inspected by a Proper officer. The provisions for such inspection are contained in Section 68 of the Central Goods and Services Tax Act, 2017 (CGST Act).
It is important to note that the term “Proper Officer” is defined under Section 2(91) of the CGST Act. It states that ‘proper officer’ in relation to any function to be performed under this Act, means the Commissioner or the officer of the Central Tax who is assigned that function by the Commissioner in the Board.
Sub-section (1) of Section 68 obliges the person in charge of a conveyance carrying any consignment of goods exceeding a specified value to carry the prescribed documents and devices. Sub-section (3) further requires that if the conveyance is intercepted by a proper officer, the person in charge must produce these documents for verification and allow the inspection of goods.
It should be noted that Section 68 only specifies the obligation to carry and produce documents; it does not prescribe the procedure or manner of inspection, nor does it specify consequences for non-compliance. The section is limited, comprising three sub-sections, with sub-section (3) mentioning that the details of the documents carried under sub-section (1) shall be validated in the manner as may be prescribed.
Documents and devices to be carried by person in charge of a conveyance
Now for the question what documents and devices to be carried by person in charge of a conveyance, has been provided in Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the “CGST Rules”). Rule 138A –‘Documents and devices to be carried by a person in charge of a conveyance’ provides what documents and devices is to be carried. Under Rule 138A of the CGST Rules, 2017, the person in charge of a conveyance transporting goods is required to carry certain documents and devices to ensure compliance with GST provisions. These include all relevant tax invoices, bills of supply, or delivery challans relating to the goods being transported. Additionally, if applicable, the e-way bill generated under Rule 138 must be carried, either in physical form or electronically. The person must also have a device, such as a smartphone or tablet, that enables verification of the e-way bill electronically by GST officers. Any other supporting documents prescribed by law, such as export/import declarations, must also be carried.
Verification of documents and conveyance
Rule 138B provides that the Commissioner, or an officer authorized by him, may empower a proper officer to intercept any conveyance to verify the e-way bill, either in physical or electronic form, for all inter-State and intra-State movement of goods. The Commissioner is also responsible for installing Radio Frequency Identification Device (RFID) readers at locations where verification of goods movement is required, and vehicles whose e-way bills are mapped with these devices can be verified electronically. Physical verification of conveyances must be carried out by the proper officer authorized by the Commissioner.
However, if there is specific information indicating tax evasion, physical verification of a particular conveyance can also be conducted by any other officer after obtaining the necessary approval from the Commissioner or an authorized officer.
Inspection and verification of goods
Rule 138C provides for the inspection and verification of goods being transported under the e-way bill system. Proper officers are required to record a summary report of the inspection online in Part A of FORM GST EWB-03 within 24 hours of the inspection, and the final report in Part B of the form within 3 days. The Commissioner, or any authorized officer, may extend the time for submitting the final report in Part B by a further period not exceeding three days if sufficient cause is shown. For counting purposes, the 24-hour or three-day period begins from midnight of the date on which the vehicle was intercepted. Additionally, if a conveyance has already been physically verified at one place during transit within a State or in another State, no further physical verification shall be carried out in that State, unless specific information indicating tax evasion is received subsequently.
Facility for uploading information regarding detention of vehicle
Where a vehicle transporting goods has been intercepted and detained for more than thirty minutes (30 minutes), the transporter may upload the details of such detention in FORM GST EWB-04 (Report of Detention) on the common portal.
Purpose of Rule 138-138D
The purpose of this rule is to facilitate proper verification of goods in transit, prevent tax evasion, and ensure smooth compliance. Failure to carry the required documents or devices can result in detention of the goods and imposition of penalties under the CGST Act. Section 129 of the CGST Act provides for detention, seizure and release of goods and conveyances in transit while section 130 of the CGST Act provides for the confiscation of goods or conveyances and imposition of penalty.
Detention, seizure and release of goods and conveyances in transit.
Section 129 (1) provides that notwithstanding anything contained in the CGST Act, if any person transports or stores goods in transit in contravention of the provisions of the Act or the rules, both the goods and the conveyance used for transport, along with documents relating to them, shall be liable to detention or seizure. Such detained or seized goods and conveyances may be released:
- on payment of a penalty equal to 200% of the tax payable on such goods, or, in the case of exempted goods, 2% of the value of goods or ₹25,000, whichever is less, if the owner comes forward for payment;
- if the owner does not come forward, on payment of a penalty equal to 50% of the value of goods or 200% of the tax payable, whichever is higher, or in the case of exempted goods, 5% of the value of goods or ₹25,000, whichever is less; or
- upon furnishing a security equivalent to the amount payable under clauses (a) or (b) in the prescribed form and manner.
It is to be noted that no goods or conveyance shall be detained or seized without serving a formal order of detention or seizure on the person transporting the goods.
Notice for penalty and Order [sub-section (3)]: When a proper officer detains or seizes goods or a conveyance, the officer is required to issue a notice within 7 days of such detention or seizure, specifying the penalty payable. Subsequently, the officer must pass an order within 7 days from the date of service of the notice for payment of the penalty under clause (a) or clause (b) of sub-section (1).
Opportunity of being heard [sub-section (4)]: No penalty under sub-section (3) shall be determined without giving the person concerned an opportunity of being heard.
Proceeding Concluded [sub-section (5)]: Once the penalty specified under sub-section (1) is paid, all proceedings related to the notice issued under sub-section (3) are deemed to be concluded.
Recovery of Penalty [sub-section (6)]: If the person transporting the goods or the owner fails to pay the penalty within fifteen days from receipt of the order under sub-section (3), the detained or seized goods or conveyance may be sold or otherwise disposed of in the manner and within the time prescribed to recover the penalty. Please note that the conveyance shall be released on payment of the penalty or ₹1 lakh, whichever is less. In cases where the goods are perishable, hazardous, or likely to depreciate in value, the proper officer may reduce the fifteen-day period for disposal accordingly.
Circular No. 41/15/2018 dated 13.04.2018
With a view to ensuring uniformity in the implementation of the provisions of the CGST Act across all field formations, the Board, in exercise of the powers conferred under Section 168(1) of the CGST Act, issued Circular No. 41/15/2018 dated 13.04.2018, laying down the procedure for interception of conveyances for inspection of goods in movement, and for the detention, release, and confiscation of such goods and conveyances.
Subsequently, Circular No. 41/15/2018 dated 13.04.2018was amended by Circular No. 49/23/2018-GST dated 21 June 2018, whereby certain modifications were made to the procedure for interception of conveyances for inspection of goods in movement, and for the detention, release, and confiscation of such goods and conveyances, as originally clarified in Circular No. 41/15/2018 dated 13.04.2018
Thereafter, the original Circular No. 41/15/2018 dated 13.04.2018 as amended by Circular No. 49/23/2018-GST dated 21 June 2018, was further amended by Circular No. 64/38/2018-GST dated 14 September 2018, whereby additional modifications were made to the procedure for interception of conveyances for inspection of goods in movement, and for the detention, release, and confiscation of such goods and conveyances, as clarified in Circular No. 41/15/2018 dated 13.04.2018and 49/23/2018-GST dated 21 June 2018. The said Circular No. 64/38/2018-GST dated 14 September 2018 was issued with respect to the imposition of penalty in cases involving minor discrepancies in the details mentioned in the e-way bill, despite there being no major lapses in the invoices accompanying the goods in movement.
Circular 49/23/2018-GST dated 21 June 2018.
It is clarified that in terms of Rule 138C(2) of the Central Goods and Services Tax Rules, 2017, where physical verification of goods being transported on a conveyance has been conducted during transit at one place within a State or Union Territory, or in any other State or Union Territory, no further physical verification of the same conveyance shall ordinarily be carried out again in the same or any other State or Union Territory. Such re-verification is permissible only where specific information relating to evasion of tax becomes available subsequently.
The Circular further notes that, since the requisite prescribed Forms were not available on the common portal at the relevant time, actions initiated by State tax authorities were not being electronically intimated to Central tax authorities, and vice versa, resulting in doubts regarding the procedure to be followed in such situations.
In this regard, it is clarified that hard copies of notices or orders issued in the specified Forms by one tax authority may be produced by the transporter or the registered person as valid proof of initiation of action, whenever required to be shown to another tax authority.
It is further clarified that detention or confiscation of goods and/or conveyances should be resorted to only in cases where there is an actual violation of the provisions of the GST Acts or the rules made thereunder, and not otherwise.
Illustration: Where a conveyance carrying twenty-five consignments is intercepted and the person-in-charge of such conveyance produces valid e-way bills and/or other relevant documents in respect of twenty consignments, but is unable to produce the same with respect to the remaining five consignments, detention/confiscation can be made only with respect to the five consignments and the conveyance in respect of which the violation of the Act or the rules made thereunder has been established by the proper officer.
Circular No. 64/38/2018-GST dated 14 September 2018
It may be noted that the non-furnishing of information in Part B of FORM GST EWB-01 amounts to the e-way bill becoming not a valid document for the movement of goods by road as per Explanation (2) to rule 138(3) of the CGST Rules, except in the case where the goods are transported for a distance of upto fifty (50) kilometres within the State or Union territory to or from the place of business of the transporter to the place of business of the consignor or the consignee, as the case may be. It is clarified that in case a consignment of goods is accompanied by an invoice or any other specified document and not an e-way bill, proceedings under section 129 of the CGST Act may be initiated.
It was clarified therein that Section 129 of the CGST Act provides for detention and seizure of goods and conveyances, and their release upon payment of the requisite tax and penalty, only in cases where such goods are transported in contravention of the provisions of the CGST Act or the rules made thereunder. The Board further noted that proceedings under Section 129 of the CGST Act were being initiated for every minor mistake in the accompanying documents. Accordingly, it was clarified that in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated, inter alia, in the following situations:
a. Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is correct;
b. Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill;
c. Error in the address of the consignee to the extent that the locality and other details of the consignee are correct;
d. Error in one or two digits of the document number mentioned in the e-way bill;
e. Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned is correct;
f. Error in one or two digits/characters of the vehicle number.
In such cases, a penalty of ₹500/- each under Section 125 of the CGST Act and the corresponding provision of the respective State GST Act (aggregating to ₹1,000/-), or ₹1,000/- under the IGST Act, as the case may be, is required to be imposed for every consignment by issuance of an order in FORM GST DRC-07.
Circular No. 76/50/2018-GST dated March 7, 2019– Issue No. 6
Issue: Who will be considered as the “owner of the goods” for the purposes of Section 129(1) of the CGST Act?
Clarification: It is clarified that where the invoice or any other prescribed document accompanies the consignment of goods, either the consignor or the consignee, as reflected in such document, shall be deemed to be the owner of the goods for the purposes of Section 129(1) of the CGST Act.
In cases where the invoice or any other prescribed document does not accompany the consignment, the proper officer shall determine, based on the facts and circumstances of the case, the person who is to be declared as the owner of the goods.
Instruction under Circular No. 41/15/2018-GST dated 13 April 2018
CBIC instructions on interception, inspection, detention, release, and confiscation of goods and conveyances under the CGST Act:
Invocation of Section 129 – Detention & Release of Goods/Conveyance
1. The proper officer shall verify such documents and where, prima facie, no discrepancies are found, the conveyance shall be allowed to move further.
2. Where the person in charge of the conveyance fails to produce any prescribed document or where the proper officer intends to undertake an inspection, he shall record a statement of the person in charge of the conveyance in FORM GST MOV-01.
3. In addition, the proper officer shall issue an order for physical verification/inspection of the conveyance, goods and documents in FORM GST MOV-02, requiring the person in charge of the conveyance to station the conveyance at the place mentioned in such order and allow the inspection of the goods.
4. The proper officer shall, within 24 hours of the aforementioned issuance of FORM GST MOV-02, prepare a report in Part A of FORM GST EWB-03 and upload the same on the common portal. [Please note that Rule 138C provides that Proper officers are required to record a summary report of the inspection online in Part A of FORM GST EWB-03 within 24 hours of the inspection, and the final report in Part B of the form within 3 days.]
5. Within a period of 3 (three) working days from the date of issue of the order in FORM GST MOV-02, the proper officer shall conclude the inspection proceedings, either by himself or through any other proper officer authorised in this behalf. [Please note that Rule 138C provides that Proper officers are required to record a summary report of the inspection online in Part A of FORM GST EWB-03 within 24 hours of the inspection, and the final report in Part B of the form within 3 days.]
6. Where circumstances warrant such time to be extended (i.e. 3 working days), he shall obtain a written permission in FORM GST MOV-03 from the Commissioner or an officer authorized by him, for extension of time beyond three working days and a copy of the order of extension shall be served on the person in charge of the conveyance. [Please note that Rule 138C provides that the Commissioner, or any authorized officer, may extend the time for submitting the final report in Part B by a further period not exceeding three days if sufficient cause is shown. For counting purposes, the 24-hour or three-day period begins from midnight of the date on which the vehicle was intercepted.]
7. On completion of the physical verification/inspection of the conveyance and the goods in movement, the proper officer shall prepare a report of such physical verification in FORM GST MOV-04 and serve a copy of the said report to the person in charge of the goods and conveyance. The proper officer shall also record, on the common portal, the final report of the inspection in Part B of FORM GST EWB-03 within three days of such physical verification/inspection.
8. Where no discrepancies are found after the inspection of the goods and conveyance, the proper officer shall issue forthwith a release order in FORM GST MOV-05 and allow the conveyance to move further.
9. Where the proper officer is of the opinion that the goods and conveyance need to be detained under section 129 of the CGST Act, he shall issue an order of detention in FORM GST MOV-06 and a notice in FORM GST MOV-07 in accordance with the provisions of sub-section (3) of section 129 of the CGST Act, specifying the tax and penalty payable. The said notice shall be served on the person in charge of the conveyance. [Please note that Section 129(3) provides that when a proper officer detains or seizes goods or a conveyance, the officer is required to issue a notice within 7 days of such detention or seizure, specifying the penalty payable.]
10. The proper officer shall, after the amount of tax and penalty has been paid in accordance with the provisions of the CGST Act and the CGST Rules, release the goods and conveyance by an order in FORM GST MOV-05.
11. Where the owner of the goods, or the person authorized by him, or any person other than the owner of the goods comes forward to get the goods and the conveyance released by furnishing a security under clause (c) of sub-section (1) of section 129 of the CGST Act, the goods and the conveyance shall be released, by an order in FORM GST MOV-05, after obtaining a bond in FORM GST MOV-08 along with a security in the form of bank guarantee equal to the amount payable under clause (a) or clause (b) of sub-section (1) of section 129 of the CGST Act. The finalisation of the proceedings under section 129 of the CGST Act shall be taken up on priority by the officer concerned and the security provided may be adjusted against the demand arising from such proceedings.
12. Where any objections are filed against the proposed amount of tax and penalty payable, the proper officer shall consider such objections and thereafter, pass a speaking order in FORM GST MOV-09, quantifying the tax and penalty payable. [Please note that Section 129(3) & (4) provides that the officer must pass an order within 7 days from the date of service of the notice for payment of the penalty under clause (a) or clause (b) of sub-section (1). No penalty under sub-section (3) shall be determined without giving the person concerned an opportunity of being heard.]
13. The order in FORM GST MOV-09 shall be uploaded on the common portal and the demand accruing from the proceedings shall be added in the electronic liability register and the payment made shall be credited to such electronic liability register by debiting the electronic cash ledger or the electronic credit ledger of the concerned person in accordance with the provisions of section 49 of the CGST Act.
14. On payment of such tax and penalty, the goods and conveyance shall be released forthwith by an order in FORM GST MOV-05.
Invocation of Section 130 – Confiscation Proceedings
15. In case the proposed tax and penalty are not paid within seven days from the date of the issue of the order of detention in FORM GST MOV-06, action under section 130 of the CGST Act shall be initiated by serving a notice in FORM GST MOV-10, proposing confiscation of the goods and conveyance and imposition of penalty. [please read point 9 and 12 carefully]
16. Where the proper officer is of the opinion that such movement of goods is being effected to evade payment of tax, he may directly invoke section 130 of the CGST Act by issuing a notice proposing to confiscate the goods and conveyance in FORM GST MOV-10. In the said notice, the quantum of tax and penalty leviable under section 130 of the CGST Act read with section 122 of the CGST Act, and the fine in lieu of confiscation leviable under sub-section (2) of section 130 of the CGST Act shall be specified.
17. Where the conveyance is used for the carriage of goods or passengers for hire, the owner of the conveyance shall also be issued a notice under the third proviso to sub-section (2) of section 130 of the CGST Act, proposing to impose a fine equal to the tax payable on the goods being transported in lieu of confiscation of the conveyance.
18. No order for confiscation of goods or conveyance, or for imposition of penalty, shall be issued without giving the person an opportunity of being heard.
19. An ‘order of confiscation of goods and/or conveyance’ shall be passed in FORM GST MOV-11, after taking into consideration the objections filed by the person in charge of the goods (owner or his representative), and the same shall be served on the person concerned. The
20. order of confiscation of goods and conveyance may be passed as a common order in the said FORM GST MOV-11.
21. Once the order of confiscation is passed, the title of such goods shall stand transferred to the Central Government.
22. In the said order, a suitable time not exceeding three months shall be offered to make the payment of tax, penalty and fine imposed in lieu of confiscation and get the goods released.
23. The order in FORM GST MOV-11 shall be uploaded on the common portal and the demand accruing from the order shall be added in the electronic liability register and, upon payment of the demand, such register shall be credited by either debiting the electronic cash ledger or the electronic credit ledger of the concerned person in accordance with the provisions of section 49 of the CGST Act.
24. Once an order of confiscation of goods is passed in FORM GST MOV-11, the order in FORM GST MOV-09 passed earlier with respect to the said goods shall be withdrawn.
25. In case neither the owner of the goods nor any person other than the owner of the goods comes forward to make the payment of tax, penalty and fine imposed and get the goods or conveyance released within the time specified in FORM GST MOV-11, the proper officer shall auction the goods and/or conveyance by a public auction and remit the sale proceeds to the account of the Central Government.
26. Suitable modifications in the time allowed for the service of notice or order for auction or disposal shall be done in case of perishable and/or hazardous goods.
27. Whenever an order or proceedings under the CGST Act is passed by the proper officer, a corresponding order or proceedings shall be passed by him under the respective State or Union Territory GST Act and if applicable, under the Goods and Services Tax (Compensations to States) Act, 2017. Further, sub-sections (3) and (4) of section 79 of the CGST Act/respective State GST Acts may be referred to in case of recovery of arrears of central tax/State tax/Union territory tax.
28. The procedure narrated above shall be applicable mutatis mutandis for an order or proceeding under the IGST Act, 2017.
29. Demand of any tax, penalty, fine or other charges shall be added in the electronic liability ledger of the person concerned. Where no electronic liability ledger is available in case of an unregistered person, a temporary ID shall be created by the proper officer on the common portal and the liability shall be created therein. He shall also credit the payments made towards such demands of tax, penalty or fine and other charges by debiting the electronic cash ledger of the concerned person.
30. A summary of every order in FORM GST MOV-09 and FORM GST MOV-11 shall be uploaded electronically in FORM GST-DRC-07 on the common portal.
A. Invocation of Section 129 – Detention & Release of Goods/Conveyance
| Step | Action / Stage | Relevant Form | Time Limit / Key Provision |
| 1 | Verification of documents on interception | — | If no discrepancy → vehicle allowed to move |
| 2 | Statement of person in charge recorded (documents not produced / inspection intended) | MOV-01 | Immediate |
| 3 | Order for physical verification/inspection | MOV-02 | Conveyance to be stationed |
| 4 | Summary inspection report uploaded | EWB-03 (Part-A) | Within 24 hours |
| 5 | Completion of inspection proceedings | — | Within 3 working days |
| 6 | Extension of inspection period (if required) | MOV-03 | Extension beyond 3 days with Commissioner’s approval |
| 7 | Physical verification report prepared & served | MOV-04 | After inspection |
| 8 | Final inspection report uploaded | EWB-03 (Part-B) | Within 3 days of inspection |
| 9 | No discrepancy found → release | MOV-05 | Immediate |
| 10 | Detention of goods/conveyance | MOV-06 (Order) | Section 129 invoked |
| 11 | Notice specifying tax & penalty | MOV-07 | Within 7 days of detention order |
| 12 | Release on payment of tax & penalty | MOV-05 | After payment |
| 13 | Release on furnishing security/bond | MOV-08 | Bank guarantee equal to penalty |
| 14 | Objections filed by taxpayer | — | Opportunity of being heard mandatory |
| 15 | Speaking order determining tax & penalty | MOV-09 | Within 7 days of notice in MOV-07 |
| 16 | Upload order & create demand | MOV-09 + Ledger update | As per Section 49 |
| 17 | Release after payment | MOV-05 | Immediate |
B. Invocation of Section 130 – Confiscation Proceedings
| Step | Action / Stage | Relevant Form | Key Provision |
| 18 | Failure to pay tax/penalty within 7 days of detention | — | Triggers Section 130 |
| 19 | Notice proposing confiscation | MOV-10 | Tax, penalty & fine specified |
| 20 | Direct invocation of Section 130 (intent to evade tax) | MOV-10 | No prior Section 129 required |
| 21 | Notice to owner of conveyance (hire cases) | MOV-10 | Fine equal to tax payable |
| 22 | Opportunity of hearing | — | Mandatory |
| 23 | Confiscation order for goods/conveyance | MOV-11 | After considering objections |
| 24 | Common confiscation order (goods + conveyance) | MOV-11 | Permissible |
| 25 | Transfer of title to Government | — | On passing MOV-11 |
| 26 | Time allowed to redeem goods/conveyance | MOV-11 | Max 3 months |
| 27 | Upload order & create demand | MOV-11 + Ledger update | Section 49 |
| 28 | Withdrawal of earlier MOV-09 | — | Upon MOV-11 issuance |
| 29 | Public auction if payment not made | — | Sale proceeds to Govt. |
| 30 | Relaxation of timelines for perishable/hazardous goods | — | Officer’s discretion |
Proper Officer for the purposes of Section 68(3)
As per Section 68 of the CGST Act, when goods are transported from one place to another, they may be inspected by a proper officer. It is pertinent to note that the term “proper officer” is defined under Section 2(91) of the CGST Act, which provides that a ‘proper officer’, in relation to any function to be performed under the Act, means the Commissioner or any officer of the Central Tax who is assigned that function by the Commissioner in the Board. This definition clarifies the statutory authority of officers empowered to undertake inspections, detentions, and other functions under the CGST Act.
Further, Circular No. 41/15/2018-GST dated 13th April, 2018 provides that the jurisdictional Commissioner or an officer authorised by him for this purpose shall, by an order, designate an officer/officers as the proper officer/officers to conduct interception and inspection of conveyances and goods in the jurisdictional area specified in such order. Further, for the purposes of verification of the e-way bill, interception and inspection of the conveyance and/or goods, the proper officer under Rule 138B of the CGST Rules shall be the officer who has been assigned the functions under sub-section (3) of section 68 of the CGST Act vide Circular No. 3/3/2017-GST dated 5th July, 2017
As per Circular No. 3/3/2017–GST, dated 05.07.2017, the Inspector of Central Tax has been specifically assigned as a proper officer for the purposes of sub-section (3) of Section 68 of the CGST Act. This assignment clarifies that Inspectors are duly empowered to exercise the functions of inspection, verification, and related actions under Section 68(3).
Authorization of Officers of State Tax or Union Territory Tax as Proper Officers
Section 4 of the Integrated Goods and Services Tax Act, 2017 (IGST Act) ovides that, without prejudice to the provisions of the IGST Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to act as proper officers for the purposes of the IGST Act. Such authorization is subject to the exceptions and conditions as may be specified by the Government, on the recommendations of the GST Council, by way of notification.
The Hon’ble Orissa High Court in Narayan Sahu v. Union of India & Ors. Writ Petition (Civil) No. 28012 of 2024 (26.11.2024) held that officers appointed under the State Goods and Services Tax Act are authorised to act as Proper Officers under the IGST Act by virtue of Section 4 of the IGST Act, even in the absence of a specific notification delineating jurisdiction and functions, provided there is no notification restricting their authority. The writ petition challenging jurisdiction was dismissed.
In Shree Maa Trading Company & Others v. State of U.P. & Others, Writ Tax No. 3171 of 2025, Judgment dated 21.08.2025, the Allahabad High Court upheld the validity of proceedings initiated by State GST authorities in respect of inter-State movement of goods, reaffirming that officers appointed under the State GST Act are duly authorised to act as “proper officers” under the IGST Act by virtue of Section 4 of the IGST Act, 2017.
The petitioners challenged the detention, seizure, and penalty proceedings initiated under Section 129 of the GST laws on the ground that the goods were being transported in the course of inter-State trade and that, in the absence of a specific notification under Section 4 of the IGST Act, State GST officers lacked jurisdiction to act. It was further contended that only Central GST officers could initiate such proceedings. Rejecting the challenge, the Court held that Section 4 of the IGST Act itself statutorily authorises officers appointed under the SGST Act to function as proper officers for IGST purposes, and that a separate notification is required only if the Government intends to carve out exceptions or impose conditions. In the absence of any such restrictive notification, the action of the State authorities could not be said to be without jurisdiction.
The Court relied upon earlier decisions, including Advantage India Logistics Pvt. Ltd. v. Union of India (Madhya Pradesh High Court) and M/s Bright Road Logistics v. State of Haryana (Punjab & Haryana High Court), to reiterate that cross-empowerment under the GST framework is inherent and does not depend upon issuance of a separate notification for each function.
Amendment to Section 129 by the Finance Act, 2021 (w.e.f. 01.01.2022)
It is pertinent to note that Section 129 of the CGST Act, 2017 was amended by the Finance Act, 2021 with effect from 01.01.2022 vide Notification No. 39/2021–Central Tax dated 21.12.2021. In the course of the said amendment, sub-section (2) of Section 129 was omitted. Prior to its omission, Section 129(2) read as under:
“(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyance.”
Further, sub-section (6) of Section 129 was also fully substituted by the said amendment. Prior to its substitution, Section 129(6) read as under:
“(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.”
Prior to the aforesaid amendment, goods detained or seized during transit under Section 129 were released by resorting to the provisions of Section 67(6) of the CGST Act, by virtue of the express statutory linkage provided under Section 129(2). However, with the omission of sub-section (2) of Section 129 with effect from 01.01.2022, the said statutory linkage has been consciously removed by the legislature.
It is significant to note that Section 67(6) refers only to “goods”, whereas Section 129 independently and expressly governs both “goods and conveyance”. Upon the deletion of Section 129(2), the facility of provisional release under Section 67(6) is no longer available in respect of goods or conveyances detained or seized during transit under Section 129. The invocation of Section 67(6) in such cases is therefore legally impermissible.
Post-amendment, Section 129 has emerged as a self-contained and exhaustive code governing the detention, seizure, and release of goods as well as conveyances during transit. The release mechanism is now governed exclusively by the substituted sub-section (6) of Section 129, which provides as under:
“(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.”
Accordingly, after the amendment to Section 129 by the Finance Act, 2021, once goods or conveyance are detained or seized during transit under Section 129, their release can be sought only in accordance with the procedure and conditions expressly prescribed under Section 129 of the Act, and not under Section 67(6).
Rule 144A (Recovery of penalty by sale of goods or conveyance detained or seized in transit) of the CGST Rules, 2017, introduced pursuant to the Finance Act, 2021, provides a distinct and independent mechanism for recovery of penalty under Section 129 of the CGST Act. The amendments to Rules 144, 144A, and 147 unequivocally manifest the legislative intent that Sections 129 and 130 operate in separate and independent fields. Consequently, once proceedings are initiated under Section 129, including by issuance of Form GST MOV-06, the proper officer is duty-bound to carry such proceedings to their logical conclusion strictly in accordance with the procedure prescribed under Section 129 and the independent recovery mechanism contemplated thereunder, without resorting to proceedings under Section 130.
The legislative intent to delink Sections 129 and 130 of the CGST Act is clearly discernible from the Statement of Objects and Reasons of the Finance Act, 2021. Both provisions prescribe distinct statutory procedures and contemplate different consequences. While Section 129 deals with detention and release of goods and conveyances during transit upon payment of prescribed penalty, Section 130 operates in a separate field and entails far graver consequences, including confiscation, whereby the title in the goods or conveyance vests in the Government. Ordinarily, the two provisions are intended to operate within their respective spheres; however, an overlap may arise only in cases where there is a clear and demonstrable intent to evade payment of tax.
Confiscation of Goods or Conveyances and Levy of Penalty
Section 129(1) of the CGST Act provides that, notwithstanding anything contained in the Act, where any person transports or stores goods while in transit in contravention of the provisions of the Act or the rules made thereunder, such goods, the conveyance used for their transport, and the related documents shall be liable to detention or seizure. The provision primarily addresses procedural or technical violations during movement of goods, and release is permitted upon payment of the prescribed penalty or furnishing of security, without involving confiscation unless further conditions are met.
In contrast, Section 130(1) of the CGST Act applies where a person supplies or receives goods in contravention of the Act or rules with an intent to evade payment of tax. In such cases, the goods and/or conveyance are liable to confiscation, and the person concerned is also liable to penalty under Section 122. Section 130 is therefore invoked only in cases involving mens rea (intent to evade tax) and entails harsher consequences, including transfer of title of goods or conveyance to the Government upon confiscation.
It is pertinent to note that Section 130(1) of the CGST Act was substituted by the Finance Act, 2021 with effect from 01.01.2022, whereby the non obstante clause—“notwithstanding anything contained in this Act”—was expressly omitted.
It is pertinent to mention that sub-section (5) of Section 130 of the CGST Act categorically provides that where any goods or conveyance are confiscated under the Act, the title in such goods or conveyance shall thereupon vest in the Government. This statutory consequence of transfer of ownership is a defining and distinguishing feature of confiscation proceedings under Section 130.
As noted earlier, prior to its amendment by the Finance Act, 2021, sub-section (6) of Section 129 provided that where the person transporting any goods or the owner of the goods failed to pay the amount of tax and penalty as prescribed under sub-section (1) within fourteen days of detention or seizure, further proceedings were required to be initiated in accordance with the provisions of Section 130.
However, post-amendment, Section 129(6) has been fundamentally altered. It now provides that 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 otherwise disposed of, in the manner and within the time prescribed, solely for the purpose of recovery of the penalty payable under sub-section (3).
In furtherance of this legislative shift, Rule 144A (Recovery of penalty by sale of goods or conveyance detained or seized in transit) of the CGST Rules, 2017, introduced pursuant to the Finance Act, 2021, prescribes a distinct and independent mechanism for recovery of penalty under Section 129 of the CGST Act, thereby reinforcing the legislative intent to delink detention proceedings under Section 129 from confiscation proceedings under Section 130.
Panchhi Traders v. State of Gujarat, decided on 11 December 2025.
The Gujarat High Court has recently given an important judgment in the case of Panchhi Traders v. State of Gujarat, decided on 11 December 2025. In this case, the Court explained how Sections 129 and 130 of the GST law should be used by GST officers. The judgment deals with a common problem where GST authorities were starting confiscation proceedings automatically in transit cases, without proper examination. The Court clearly laid down guidelines and limits on the powers of GST officers, so that these strict provisions are used only in genuine cases and not in a routine or mechanical manner. This judgment is particularly significant because the Court emphasized that confiscation is a serious and drastic measure, which has a direct and deep impact on a business, its operations, and its financial condition. The Court also made it clear that any authorised officer acting contrary to these observations would be liable for contempt of court.
Issue No.1- Whether confiscation proceedings initiated under Section 130 of the CGST Act after detention under Section 129 are required to be treated as seizure under Section 67(6), thereby making provisional release of goods mandatory upon payment of applicable tax, interest and penalty, or on furnishing security?
The Court conclusively held that after the amendment to Section 129 of the CGST Act, Parliament has consciously severed the linkage with Section 67(6) for provisional release of goods and conveyance seized during transit. Accordingly, once goods and conveyance are detained or seized under Section 129, provisional release under Section 67(6) is no longer available, and release can be sought only in the manner prescribed under Section 129.
Issue No.2- Whether the deletion of the non-obstante clause from Section 130 of the CGST Act affects the power of the authorities to initiate confiscation proceedings?
The Court held that the deletion of the non-obstante clause from Section 130 does not affect the authority’s power to initiate confiscation proceedings. Sections 129 and 130 operate independently and are mutually exclusive, with Section 130 specifically addressing cases involving an intention to evade tax. The retention of the non-obstante clause in Section 129 does not impede the operation of Section 130, and authorities may invoke Section 130 where tax evasion is apparent, even during or after proceedings under Section 129.
Issue No.3-Whether, after the delinking of Sections 129 and 130 of the CGST Act by Finance Act 2021, confiscation proceedings under Section 130 can be initiated midway by issuance of MOV-10 or MOV-11 without first completing the procedure prescribed under Section 129? or
Can the proper officer invoke Section 130 of the CGST Act by issuing MOV-10 or MOV-11 without completing proceedings under Section 129?
The Court held that even after the amendments brought by the Finance Act, 2021, Sections 129 and 130 of the CGST Act operate independently and are mutually exclusive. While proceedings initiated under Section 129 must ordinarily be carried to their logical conclusion, the proper officer is not barred from invoking Section 130 midway if, during detention or seizure, an opinion is formed that the movement of goods involved an intention to evade tax. Thus, confiscation under Section 130 can be resorted to notwithstanding pending proceedings under Section 129, provided the element of tax evasion is clearly established.
Issue No.4-Is Circular No. 41/15/2018-GST dated 13.04.2018 ultra vires after the amendment by Finance Act, 2021?
The Court observed that Circular No. 41/15/2018-GST, issued under Section 168 of the CGST Act, provides procedural guidance for interception, detention, and confiscation of goods and conveyances. It does not violate any statutory provisions and cannot be held ultravires merely because proceedings under Section 130 are separately prescribed.
Issue No.5- Can the officer intercepting goods under Section 129 of the CGST Act assess tax or decide the intent to evade tax, or invoke Section 130 at the time of interception?
The Court held that the officer intercepting goods under Section 129 cannot assess tax or invoke Section 130, and goods must be released under Section 129 conditions. Physical verification may be carried out only by the Commissioner or an authorised officer with prior approval, and any confiscation or penalty under FORM MV-10 or MV-11 by a non-jurisdictional officer is without authority and illegal.
Issue No.6-Is it mandatory to conduct search and seizure under Section 67 of the CGST Act to establish an intent to evade tax u/s 130?
The Court held that it is not mandatory to conduct search and seizure under Section 67 of the CGST Act to establish intent to evade tax for invoking Section 130 in cases of goods in transit. Where, at the stage of interception under Sections 68 and 129, the Proper Officer finds clear and blatant indicators of intent to evade tax from attendant circumstances, confiscation proceedings under Section 130 may be initiated. However, if no such intent is discernible, the authorities must strictly confine themselves to the procedure under Section 129. Confiscation being a drastic measure, it cannot rest on mere suspicion and must be supported by concrete material.
Issue No.7- A notice in FORM MOV-10 invoking Section 130 of the CGST Act cannot be issued merely on suspicion or on the basis of discrepancies reflected in the GST portal, particularly when such discrepancies may have originated from a supplier’s supplier.
The Court held that a notice in FORM MOV-10 invoking Section 130 cannot be issued merely on suspicion or on the basis of portal-based discrepancies, especially when such discrepancies may originate from upstream suppliers. Confiscation during transit is permissible only where there is clear, cogent material indicating a deliberate intent to evade tax, and not for minor or technical violations. In the absence of such intent, authorities must strictly confine their action to Section 129 of the CGST Act. The power of confiscation, being drastic in nature, is reserved for cases of grave and blatant contraventions having a direct nexus with tax evasion.
Issue No.8- Whether the Proper Officer may initiate proceedings under Sections 73 or 74 of the CGST Act in cases of unpaid tax due to error or fraud, instead of converting detention proceedings under Section 129 into confiscation proceedings under Section 130 of the CGST Act?
The Court held that Sections 73 and 74 of the CGST Act, dealing with assessment and recovery of tax, are entirely independent of Sections 129 and 130, which govern detention, seizure, and confiscation of goods in transit. Reference to Sections 73 and 74 is unnecessary for interpreting Sections 129 and 130, as each provision operates within its distinct sphere, and detention under Section 129 cannot be converted into confiscation under Section 130 without following the statutory framework.
Issue No.9-In case of goods or conveyance are released upon payment of tax and penalty under Section 129 of the CGST Act, can authorities may later initiate confiscation proceedings under Section 130 of the Act?
The Court held that Section 130 of the CGST Act can be invoked independently for confiscation if, upon seizure, there is an indication of intent to evade tax. Even if goods or conveyance are released upon payment of tax and penalty under Section 129, authorities may later initiate confiscation proceedings under Section 130 if incriminating evidence against the owner is discovered during the course of inquiry.
Issue No.10- Time line for framing an opinion of evasion of tax for goods in transit.
The Court has observed and fixed time line for framing an opinion of evasion of tax for goods in transit. Rule 138C of the CGST Rules, 2017, the Proper Officer must prepare a summary report of every inspection of goods within 24 hours in Part A of FORM GST-EWB-03, and the final report in Part B must be recorded within three days. This period may be extended by an additional three days by the Commissioner or an authorized officer, if warranted, through FORM MOV-03. Thus, the final report in FORM MOV-04 cannot exceed six days. However, even after release upon payment of tax and penalty, authorities may later initiate confiscation under Section 130 if serious incriminating evidence against the owner is discovered.
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