Bank Guarantee When Goods Seized in transit under GST

By | February 23, 2019
(Last Updated On: February 23, 2019)

Bank Guarantee When Goods Seized in transit under GST

Goods in transit must be accompanied by prescribed documents (Like Eway bill, Tax Invoice, Bill of Supply, Delivery Challan etc)  without which they may be detained and confiscated.

To release goods without payment of taxes and penalty , you are required give

  1. Bond for the value of the goods in FORM GST INS-04 and 
  2. Bank Guarantee equivalent to the amount of applicable tax, interest and penalty payable in Form GST INS-04 

When Goods can be Seized under GST

Both the goods and the conveyance will be confiscated or Seized if any person – 

  • Supplies/receives goods in contravention of the provisions of GST to evade tax
  • Cannot account for the presence of seized goods
  • Supplies goods without registering (even though he is liable to register)
  • Violates rules to evade tax
  • Uses any conveyance/vehicle to transport goods in contravention to the GST provisions

The vehicle might not be confiscated if the owner of the vehicle can prove that it was used without his knowledge.

Procedure for seizure of goods in transit

Goods and conveyance will be detained/seized only after giving an order of detention to the person transporting the goods.

Order of seizure is passed in Form-GST-INS-02

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 15 days, then the goods will be confiscated.  The time of 7 days will be reduced in case of perishable or hazardous goods.

How Sezied Goods Can be Released under GST ? Can the Bank Guarantee be given when Goods are Seized in transit ?

If Goods and conveyance is detained or seized , it can be released  by any one of the following methods .

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;
(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;
(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b)in such form  and manner as may be prescribed

[ Refer Section 129 of CGST Act 2017 ]

What is the Format of Giving Bank Guarantee under GST ?

Bank Guarantee has to be given in Form GST INS-04 

What is the Procedure of giving Bank Guarantee  under GST ?

 As per Rule 140 of the CGST 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.

Explanation.—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 Services Tax (Compensation to States) Act, 2017 (15 of 2017).

(2) 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.

Penalty in lieu of confiscation

The minimum fine will be as per above i.e., 100% tax if the owner comes forward and 50% of the value of goods before tax if the owner does not come forward.

ParticularsWhen owner comes forwardWhen owner does not come forward
Value of goods1,00,0001,00,000
GST@12%12,00012,000
Penalty12,00050,000 (50% of Value of Goods)
Total Payment24,00062,000

The person can also opt to furnish a security covering the amount payable.

Maximum fine will be the market value of goods before tax.

For confiscation of vehicle, the owner will be given the option of paying a fine equal to the tax payable on the goods.

Fine in lieu of confiscation does not discharge the other penalties applicable. Other taxes, charges, penalties will still be payable after paying fine in lieu of confiscation.

Goods will not be confiscated without a show cause notice and an opportunity of being heard.

Once confiscated, the goods will become the property of the government. 3 months will be given for payment of the confiscation fine after which the goods will be sold.

Confiscation will not affect other punishments under the provisions of GST, i.e., all penalties and prosecutions will still be applicable.

Judgments on Bank Guarantee When Goods Seized in transit under GST

Seized goods could be released on providing bank guarantee :KERALA HC

Seized goods under GST act to be released on giving security equal to invoice value, other than cash or bank guarantee : ALLAHABAD HC

Bail application rejected due to evasion of GST by opening forged firms : HC

Vehicle details not updated in Eway bill, Goods detained could be released on furnishing bank guarantee :KERALA HC

GST confiscation proceedings valid if notice issued to driver of vehicle : HC

Common GST investigations of units can not be carried on : HC

Release of Seized goods & vehicle on indemnity bond for value of tax only without penalty amount : ALLAHABAD HC

E-way Bill Date wrongly declared , Seized goods to be released on furnishing security other than cash or bank guarantee: HC

Goods detained under GST could be released on giving bank guarantee : HC

Encashment of bank guarantee doesn’t amount to payment of duty: Madras HC

Do not invoke bank guarantee if there is time to file Appeal :KERALA HC

Bank guarantee can’t be encashed under GST till statutory remedy is exhausted by assessee : HC

GST confiscation proceedings valid if notice issued to driver of vehicle : HC

Do expeditious adjudication for release of detained goods under GST : KERALA HC

Officers appointed under State GST Act are proper officers under IGST Act for search and seizure : High Court

Procedure to Release seized goods.

As per Rule 141 of CGST Rules 2017

1) Where the goods or things seized are of perishable or hazardous nature, and if the taxable person pays an amount equivalent to the market price of such goods or things or the amount of tax, interest and penalty that is or may become payable by the taxable person, whichever is lower, such goods or, as the case may be, things shall be released forthwith, by an order in FORM GST INS-05, on proof of payment.

(2) Where the taxable person fails to pay the amount referred to in sub-rule (1) in respect of the said goods or things, the Commissioner may dispose of such goods or things and the amount realized thereby shall be adjusted against the tax, interest, penalty, or any other amount payable in respect of such goods or things.

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