Section 130 of the CGST Act: Confiscation, Mens Rea & Key Jurisprudence

Section 130 of the CGST Act, 2017, which deals with the confiscation of goods or conveyances, presents several critical legal and procedural issues. Key areas of contention include the mandatory prerequisite of establishing mens rea (intent to evade tax) for invoking confiscation, as well as distinguishing its application from the detention provisions under Section 129. 

Furthermore, adherence to the principles of natural justice, specifically the provision of an adequate opportunity to be heard under Section 130(4), is a frequent subject of litigation. The jurisdictional validity of initiating confiscation proceedings when goods are not "in transit" also remains a contentious issue. Finally, the interplay between Section 129 and Section 130, particularly post the amendment by the Finance Act, 2021, and the correct determination of the fine in lieu of confiscation, is a significant matter requiring careful legal interpretation.

Detailed Explanation

An analysis of Section 130 of the CGST Act, 2017, and related jurisprudence reveals several recurring legal and procedural challenges. The most prominent issues are detailed below:

1. Interplay Between Section 129 (Detention) and Section 130 (Confiscation)

A primary area of dispute is the relationship and procedural sequence between detention under Section 129 and confiscation under Section 130.

• Pre-Amendment (Before 01.01.2022): The unamended Section 129(6) stipulated that if the tax and penalty determined under Section 129(1) were not paid within fourteen days, "further proceedings shall be initiated in accordance with the provisions of section 130." This created a direct statutory link, making confiscation a consequential step following non-payment of the detention demand.

• In The Union Of India & Ors. vs M/S Rajeev Traders [NC: 2023:KHC-D:11299-DB :: (2022) 66 GSTL 15], the Karnataka High Court held that under the pre-amendment regime, initiating confiscation proceedings under Section 130 without waiting for the mandatory 14-day period under Section 129(6) to expire was illegal and without jurisdiction. The court emphasised the sequential nature of the provisions at that time.

• Post-Amendment (From 01.01.2022): The Finance Act, 2021, significantly amended both sections. The new Section 129(6) provides for the sale or disposal of detained goods/conveyances to recover the penalty if not paid within fifteen days. The explicit reference to initiating proceedings under Section 130 has been removed. This delinking clarifies that Section 129 is a self-contained code for dealing with contraventions during transit, and confiscation under Section 130 is not an automatic consequence of non-payment under Section 129.

• Direct Invocation of Section 130: Circular No. 41/15/2018-GST clarifies in Para (l) that if a proper officer believes that the movement of goods is intended to evade tax, they may directly invoke Section 130 by issuing a notice in FORM GST MOV-10, bypassing the Section 129 procedure.

2. The Prerequisite of "Intent to Evade Tax" (Mens Rea)

Section 130(1) can be invoked only where a person acts with the "intent to evade payment of tax." This is a higher threshold than a mere procedural lapse.

• Distinction from Section 129: Section 129 can be triggered for any contravention of the Act or Rules during transit, irrespective of intent. In contrast, Section 130 is a punitive measure reserved for cases involving deliberate tax evasion.

• Judicial Interpretation: Courts have consistently held that confiscation is an aggravated action that cannot be initiated for minor or procedural infractions.

3. Procedural Safeguards: Opportunity of Being Heard

Section 130(4) explicitly mandates that "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."

• Compliance with Natural Justice: This provision is a cornerstone of natural justice. Any failure to provide a genuine and effective hearing can render the confiscation order void.

• Case Law Example: The importance of this safeguard was highlighted in Gajanand Granite v. State Tax Officer (Uttarakhand HC, June 12, 2025) (2025) 32 CENTAX 38. The High Court quashed the confiscation order because the entire proceeding—from notice to the final order—was completed on a single day, with the reply being taken from the driver of the vehicle, not the owner of the goods. The Court termed this a clear violation of the statutory mandate under Section 130(4).

4. Jurisdictional Prerequisite: Goods "In Transit"

While Section 130 itself does not contain the words "in transit," it is predominantly invoked in cases of interception of goods in movement, often in conjunction with Section 129, which explicitly applies to goods and conveyances "in transit." A key issue arises when proceedings are initiated after the transit has concluded.

• In M R Lub Industries v. State of Gujarat (Gujarat HC, April 17, 2025) (2025) 30 CENTAX 283, the High Court admitted a petition challenging a confiscation order where the GST proceedings (FORM GST MOV-01) were initiated two months after the police had already seized the goods and the vehicle was stationary. The petitioner's primary argument was that the authorities lacked jurisdiction to invoke Section 129 or 130 as the goods were no longer "in transit," raising a significant question on the applicability of these provisions.

5. Calculation of Fine in Lieu of Confiscation

Section 130(2) provides an option to the owner to pay a fine in lieu of confiscation. The calculation of this fine is governed by its provisos and is often a point of contention.

• Fine for Goods: The fine shall not exceed the market value of the goods less the tax chargeable. However, the aggregate of such fine and penalty leviable shall not be less than a penalty equal to 100% of the tax payable on such goods (as per the amendment w.e.f. 01.01.2022).

• Fine for Conveyance: The third proviso to Section 130(2) specifically deals with conveyances used for hire. It states that the owner shall be given an option to pay a fine "equal to the tax payable on the goods being transported thereon" in lieu of confiscation.

• The interpretation of this proviso was the subject matter in Jilani Shahnavaz Mulla v. State of Gujarat [2019 (9) TR 1984 (2020) 32 GSTL J383], where the court considered the petitioner's argument that the fine for the conveyance should be limited to the tax amount. The court granted interim relief for the release of the truck pending final adjudication on the matter.

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