Section 130 of the CGST Act contemplate release of goods on payment of fine in lieu of confiscation: Kerala HC

Issue  

A review petition filed before the Kerala HC against the interim order questioning: 

(i) Whether the provisions of section 130 of the CGST Act contemplate any provisional release of goods, as directed in the interim order of this Court?  

(ii) Whether the amount payable for release of the goods under section 130 of the CGST Act is fine alone or is it fine, penalty and tax to be paid together for securing release of the goods? and,  

(iii) What is the basis or rate for calculating the fine under section 130 of the CGST Act? 

Facts  

• On 03-08-2021, GST officer conducted inspection who seized different ‘beedi’ Godowns of the respondent as per Rule 139(2) of the Central Goods and Services Tax Rules, 2017. 
• After failure to release the seized goods respondent immediately filled the Writ Petition wherein the he was directed to approach the Tax Officer for release of goods. 
• In the meantime, the Tax Officer issued three separate show cause notices, all dated 25-08-2021, proposing to confiscate the goods and the conveyances and levied penalty under section 130 of the Act. 
• Thereafter, the respondent immediately filed another writ petition, challenging the show-cause notices wherein this Court directed the Tax Officer to release the goods, on payment of the amounts contemplated under section 130(2) of the Act, after the Courts order, the Tax Officer is refusing to abide by the mandate of the Statute, despite the respondent offering to pay the amounts in lieu of confiscation. 
• Thereafter, the Tax Officer preferred the present review petition. 

Findings   

Section 130(1) of the Act states that, if any of the five conditions specified in the sub-clauses (i) to (v) are satisfied, then, there can be confiscation of goods and conveyances and a further penalty leviable on the person. The concept of confiscation is that the confiscated goods are taken by the State as its own property, depriving the true owner of the title to the said goods. 

Section 130(1) deals with the instances when goods and conveyances are liable for confiscation and the effect of confiscation. (I am skipping sub-clauses (2) and (3) for the time being). When subclause (4) speaks about giving an opportunity of being heard, subclause (5) refers to the vesting of title of the goods upon the Government after confiscation and sub-clause (6) refers to taking possession of the things confiscated. Sub-clause (7) comes after all the above provisions and refers to confiscated goods, clearly indicating the intent of the legislature that confiscation has already taken place. 

Judgement  

Kerala HC said that the provisions of section 130 of the Act contemplate release of goods on payment of fine in lieu of confiscation at two stages (i) during the process of adjudication, under section 130(2) and, (ii) post-adjudication under section 130(3) of the Act. At the time of release of goods under section 130(2) of the Act, the owner of the goods is required to pay the fine in lieu of confiscation alone, while penalty tax and other charges can be paid after adjudication. The basis for calculating the fine in lieu of confiscation under section 130 of the Act is only the market value as defined under section 2(73) of the Act and not the maximum retail price. 

Therefore, this Court dismissed the review petition.  

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