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THE INSIGHT

Provisional release of seized goods - A comparison under CGST Act, 2017 & CA, 1962
By Rajesh K. Arora, Former Superintendent GST, C.Ex. & Customs
Sep 17, 2020

1. Under GST Act, the procedure for seizure of goods has been enumerated under the provisions of Section 67 of the Act. Sub Section 2 of Section 67 stipulates that

(2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.

Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorized by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

2.1 The procedure for provisional release of seized goods under the GST has been enumerated under the provisions of Sub Section 6 of Section 67, which stipulates that

(6) The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. Corresponding Rule 140 of the CGST Rules.

(7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:

Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.

(8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed. Corresponding Rule 141 of the CGST Rules.

2.2 The procedure for bond and security for release of seized goods has been provided under rule 140 of the GST Rules, which states that:-

(1) 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.

(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.

2.3 The procedure for release of seized goods of perishable or hazardous nature has been provided under rule 141 of the CGST Rules, which states that:-

(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 proper officer 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.

3. Circular No. 3/3/2017- GST dated 5th July, 2017 provides various proper officers under the section 67 of CGST Act and Rule 141 of the CGST Rules.

S. No. Designation of the officer Functions under Section of the Central Goods and Services Tax Act, 2017 or the rules made thereunder
(1) (2) (3)
1. Principal Commissioner/ Commissioner of Central Tax i. Sub- section (7) of Section 67
2. Additional or Joint
Commissioner of Central Tax

i. Sub- sections (1), (2), (5) and (9) of Section 67

vi. Sub-rule (2) of Rule 140

4.1 Thus, in accordance to provisions of Sub Section 2 of Section 67 of the GST Act, the goods may be seized on a reasonable belief. The said goods shall be released provisionally under the provisions of Sub Section 6 of Section 67 i.e. upon execution of a bond for the value of the goods and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. Thus, provisional release of goods does not include the amount of fine, if any, to be imposed by the adjudicating authority.

4.2 Sub rule 2 of Rule 140 provides that where 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 adjusted against the tax, interest and penalty and fine, if any, payable. But when bank guarantee in respect of amount of fine has not been demanded from the person to whom goods were provisionally release under rule 140(1), then how that amount would be adjusted.

4.3 Sub Section 8 of section 67 stipulates release of seized goods of perishable or hazardous nature, as soon as after its seizure, by the proper officer in such manner as may be prescribed. But no proper officer has been defined for Sub section 8 of Section 67 . Rule 141 prescribes release of such seized goods on payment of an amount equivalent to the market price of such goods or the amount of tax, interest and penalty payable by the taxable person, whichever is lower. Earlier for the word "Commissioner" has been substituted by the words "proper officer" w.e.f. 23.03.2020 vide notification no. 16/2020 Central Tax dated 23.03.2020. But the proper officer under the said sub rule 2 of rule 141 has not been defined .

5. Under Customs Act, the procedure of seizure of goods, documents and things has been provided under Section 110, which states that

110. Seizure of goods, documents and things - 

(1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods :

Provided that where it is not practicable to remove, transport, store or take physical possession of the seized goods for any reason, the proper officer may give custody of the seized goods to the owner of the goods or the beneficial owner or any person holding himself out to be the importer, or any other person from whose custody such goods have been seized, on execution of an undertaking by such person that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:

Provided further that where it is not practicable to seize any such goods, the proper officer may serve an order on the owner of the goods or the beneficial owner or any person holding himself out to be importer, or any other person from whose custody such goods have been found, directing that such person shall not remove, part with, or otherwise deal with such goods except with the previous permission of such officer.']

(1A) The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification in the Official Gazette, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (1), be disposed of by the proper officer in such manner as the Central Government may, from time to time, determine after following the procedure hereinafter specified.

1(B)…….

(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:

Provided that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform the person from whom such goods were seized before the expiry of the period so specified:

Provided further that where any order for provisional release of the seized goods has been passed under section 110A, the specified period of six months shall not apply.

6. Further procedure for provisional release of goods, documents and things seized pending adjudication  has been provided under the provisions of Section 110 A of the Customs Act, 1962, which provides that

110A. Any goods, documents or things seized under section 110, may, pending the order of the adjudicating authority, be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.

7. The CBIC has issued a circular No. 35/2017-Customs dated 16.08.2017 whereby guidelines for provisional release of seized imported goods pending adjudication under Section 110 of the Customs Act, 1962 were issued, which states that -

(a) Seized imported goods shall be released provisionally by the competent authority upon request of the owner of the seized goods, subject to executing a Bond for the full value/ estimated value of the seized goods.

(b) Further, in addition to the Bond, the competent authority shall take a Bank Guarantee or Security Deposit to cover the following:

(i) the entire amount of duty/differential duty leviable on the seized goods being provisionally released;

(ii) amount of fine that may be levied in lieu of confiscation under Section 125 of the Customs Act, 1962 at the time of adjudication of the case. While securing the same, the competent authority shall take into account the nature of the seized goods, the duty and charges payable on the said goods, their market price and the estimated margin of profit;

(iii) amount of penalties that may be levied under the Customs Act, 1962, as applicable, at the time of adjudication of the case.

(c) Where provisional release of seized imported goods is allowed, the bond shall contain an undertaking that the importer shall pay the duty, fine and/or penalty as may be adjudged by the Adjudicating Authority, subject to appellate provisions under the Act. Further, where security is furnished by way of Bank Guarantee, the Bank Guarantee should contain a clause binding the issuing bank to keep it renewed and valid till final adjudication of the case, or in the event of non-renewal of Bank Guarantee as above, the guaranteed amount be credited to the Government account by the bank on its own.

8.1 Thus, under the provisions of Sub Section 1 of Section 110, when the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods. The seized goods may be release provisionally under Section 110A to the owner on taking a bond from him with such security and conditions as the adjudicating authority may require.

8.2 The Adjudicating Authority while deciding the amount of bank guarantee will include the entire amount of duty/differential duty leviable on the seized goods, amount of fine that may be levied in lieu of confiscation under Section 125 of the Customs Act, 1962, amount of penalties that may be levied under the Customs Act, 1962, in terms of circular No. 35/2017-Customs dated 16.08.2017.

9. Thus, summarizing the provisions for provisional Release, under Customs Act, it is clear that the amount of bank Guarantee would include the amount of duty, penalty and fine. Further, the amount of Bank Guarantee would be decided by the adjudicating authority, whereas under GST Act, it has not been stated as to which authority will provisionally release the seized goods, either it would be Seizing/Investigating authority or Adjudication authority, as divergent practice is being followed, in absence of clarity on the competent authority. Further, under Section 67(6) read with rule 140(1) of CGST Rules, the bank guarantee does not include the amount of fine imposed. Further, in cases of seizure of perishable goods, under Section 67(8) read with rule 141, no proper officer has been defined under the Act and under the Rules.

10. The CBIC, the nodal authority for exercising both Customs Act and GST Act, should bring out clarification under GST Act, as regards the competent authority for provisionally releasing seized goods, whether the same would be Investigating authority or Adjudicating authority, as clearly provided under the Customs Act. A clarification is required that the Bank guarantee would include the amount of fine, similar to circular No. 35/2017-Customs dated 16.08.2017. Further, the CBIC should define the proper officer under Section 67(8) read with rule141.

[The views expressed are strictly personal]