GST Council Emphasizes Legal Framework for Goods Detention

The GST Council, during its 57th meeting on 8 October 2026, emphasized that the detention, valuation, and confiscation of goods under the Goods and Services Tax (GST) must adhere to established legal frameworks rather than mere suspicion. The Council’s recommendations focus on ensuring that enforcement actions are grounded in statutory mandates outlined in Sections 68, 129, and 130 of the Central Goods and Services Tax (CGST) Act.

The Council highlighted that officers must follow prescribed procedures when detaining goods in transit. Specifically, Section 129(1) states that goods transported in violation of the Act or its rules can be detained, but a formal order must be served to the transporter. Informal verbal directions are insufficient, as emphasized by the GST Council’s recommendations.

The enforcement of GST is intended to detect tax evasion and ensure compliance. However, the Council noted that this responsibility must be executed within the boundaries of the law. Officers are mandated to identify contraventions clearly, provide an opportunity for a hearing, and explain the applicable provisions before any enforcement action is taken. This aligns with the protections afforded to taxpayers under Sections 129(4) and 130(4), which explicitly guarantee the right to a hearing.

The recent developments also propose to restrict the interception of goods in transit and potentially exclude certain goods from confiscation under Section 130. However, the Council clarified that these recommendations would only become legally binding through subsequent amendments or notifications and should not be misrepresented as already effective measures.

Further, the procedures for detention and seizure are outlined in various circulars, including CBIC Circular No. 41/15/2018-GST, which details the process of interception. It is crucial to note that older references to tax penalties must be interpreted in light of amendments effective from 1 January 2022.

For example, if taxable goods valued at ₹10,00,000 attract a total GST of 18%, the penalty for non-compliance would be ₹3,60,000, calculated as 200% of the tax amount. For exempt goods, the penalty is capped at ₹25,000 or 5% of their value, whichever is lower. The process for releasing detained goods involves filing a bond and possibly providing a bank guarantee, as stipulated in the procedural guidelines.

Judicial precedents, including cases such as K.P. Sugandh and Satyam Shivam Papers, underscore the importance of adhering to these legal frameworks. These rulings highlight the principle that enforcement actions must not only follow the letter of the law but also respect the rights of taxpayers.

Roadside enforcement involves several provisions, each serving a different purpose. The interception procedure is explained in CBIC Circular No. 41/15/2018-GST dated 13 April 2018. However, its older references to tax-and-penalty demands and automatic escalation to confiscation must be read subject to the statutory amendments effective from 1 January 2022. An old circular or printed MOV form cannot override the amended Act.

Section 129(1) applies where goods are transported or stored while in transit in contravention of the Act or Rules. The goods, the conveyance used to carry them, and the related documents become liable to detention or seizure. Its proviso is important: goods or conveyance cannot be detained or seized without serving an order of detention or seizure on the person transporting the goods. A verbal direction to “keep the truck here until further instructions” should not replace the statutory order.

The release provisions distinguish between cases in which the goods owner comes forward and cases in which the owner does not. For taxable goods, the penalty is 200% of the tax payable on the goods. For exempt goods, the amount is 2% of the value of the goods or ₹25,000, whichever is less.

Illustration: Goods have a taxable value of ₹10,00,000 and attract total GST of 18%. The tax used for calculating the penalty is ₹1,80,000. The Section 129(1)(a) penalty is ₹3,60,000. This calculation does not mean that the current Section 129 release demand is “tax plus 200% penalty.” The amended provision prescribes a penalty-based release demand; any independently payable supply tax remains governed by the applicable tax provisions.

The owner should communicate its appearance promptly, identify the consignment, and authorise its representative. This helps prevent an unnecessary dispute over whether clause (a) or clause (b) applies. For exempt goods, the amount is 5% of their value or ₹25,000, whichever is less. Using the previous illustration, 50% of ₹10,00,000 is ₹5,00,000, while 200% of the tax is ₹3,60,000. The higher figure is ₹5,00,000.

Goods and conveyance may be released on furnishing security equivalent to the amount payable under clause (a) or clause (b), in the prescribed form and manner. The procedural circular describes a bond in FORM GST MOV-08 together with a bank guarantee. The application should calculate the security against the current statutory liability, not reproduce the superseded tax-and-penalty formula in an old template.

Section 129(2), which earlier applied Section 67(6) to transit detention and seizure, was omitted with effect from 1 January 2022. Accordingly, a present-day release application should not mechanically state that Section 129(2) gives an operative right to provisional release. The surviving security route under Section 129(1)(c) should be examined.

Issue the penalty notice within seven days of detention or seizure. Pass the order within seven days from the service of that notice. These are different starting points that must be observed carefully to ensure compliance with the law.