Most businesses whose goods have been stopped in transit have encountered section 129. Far fewer have encountered section 130, and those who do are usually surprised — because the two provisions look similar from the outside and are radically different in consequence.
Detention under section 129 is a costly inconvenience. Confiscation under section 130 extinguishes ownership.
Two provisions that used to be joined
Until the end of 2021, sections 129 and 130 were linked. Section 130 opened with a non-obstante clause referring to the rest of the Act, and section 129 was expressed subject to section 130, so that a failure to pay under section 129 could roll into confiscation proceedings almost as a continuation.
The Finance Act, 2021 changed this, with effect from 1 January 2022. The linkage was removed and the two provisions were made independent of each other.
The practical significance is that section 130 is no longer a next step that follows automatically from a section 129 proceeding. It is a separate proceeding, with its own grounds, its own requirements and its own burden — and the department has to establish those grounds rather than arrive at confiscation by default. That is a meaningful protection, and it is one that a business facing a confiscation notice should insist upon.
What section 129 does
Section 129 deals with detention and seizure of goods and conveyances in transit where they are transported or stored in contravention of the Act or the rules.
Following the amendments effective 1 January 2022, the amounts payable for release are penalties, and there is no separate tax component:
| Situation | Amount payable for release |
| Owner comes forward — taxable goods | Penalty equal to 200 per cent of the tax payable on such goods |
| Owner comes forward — exempted goods | 2 per cent of the value of goods or ₹25,000, whichever is less |
| Owner does not come forward — taxable goods | 50 per cent of the value of the goods or 200 per cent of the tax payable, whichever is higher |
| Owner does not come forward — exempted goods | 5 per cent of the value of goods or ₹25,000, whichever is less |
The procedure is time-bound. A notice specifying the penalty must be issued within seven days of the detention or seizure, and an order must be passed within seven days from the date of service of that notice. The person concerned must be given an opportunity of being heard.
Where the penalty is not paid within seven days of the order, proceedings under section 130 may follow — but, since the delinking, they follow as a fresh proceeding on its own grounds, not as an automatic escalation.
A conveyance detained is released on payment of the penalty under section 129(3) or ₹1,00,000, whichever is less.
The interception process is documented through the MOV series of forms — from the order of physical verification and the inspection report through to the detention order, the notice and the release order — and the demand is finalised in FORM GST DRC-07. Discrepancies in that documentation are frequently the strongest ground of challenge. Our note on e-way bill compliance covers the documentation that avoids the interception in the first place.
Most interceptions arise from documentation failures rather than evasion, which is why transit documentation is a core part of GST compliance.
What section 130 does
Section 130 provides for confiscation of goods or conveyances and levy of penalty. It applies where a person:
- supplies or receives goods in contravention of the Act or rules with intent to evade payment of tax;
- does not account for goods on which tax is liable to be paid;
- supplies goods liable to tax without having applied for registration;
- contravenes any provision of the Act or rules with intent to evade payment of tax; or
- uses a conveyance as a means of transport for carriage of goods in contravention of the Act or rules, unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner, the agent and the person in charge.
Two features distinguish it from section 129.
Intent to evade is central. Three of the five limbs require it expressly. A contravention without intent — a clerical error in an e-way bill, an expired validity because of a breakdown — engages section 129 but is not, without more, a foundation for confiscation.
Confiscation transfers title. On confiscation, the title in the goods vests in the Government. This is not a security or a hold; it is a divesting of ownership.
Why the delinking changed the department’s burden
Before 2022, the sequence from detention to confiscation was continuous enough that the distinct requirements of section 130 could be treated as procedural. After the delinking they cannot.
The consequences for a business facing a section 130 notice are practical:
The grounds must be pleaded and made out. A notice that recites a contravention without identifying which limb of section 130(1) is invoked, and without setting out the material said to establish intent to evade, is vulnerable.
Intent must be established, not inferred from the contravention itself. If the same facts constitute the contravention and the proof of intent, the requirement is being read out of the section.
A separate hearing is required. Section 130(4) requires that no order of confiscation or penalty be made without giving the person an opportunity of being heard. A hearing given in the section 129 proceeding does not discharge that requirement for a section 130 proceeding.
Where those requirements are not met, the ordinary remedies against a wrongful order are available.
Fine in lieu of confiscation
Confiscation does not necessarily mean losing the goods. Section 130(2) requires the officer ordering confiscation to give the owner an option to pay a fine in lieu of confiscation.
The quantum is bounded at both ends:
- The fine shall not exceed the market value of the goods confiscated, less the tax chargeable thereon.
- The aggregate of the fine and the penalty leviable shall not be less than the penalty leviable under section 129(1).
Where a conveyance is used for carriage of goods in contravention and is confiscated, the owner is given the option to pay a fine equal to the tax payable on the goods being transported, in lieu of confiscation.
And section 130(3) makes clear that the fine is in addition to, not instead of, the tax, penalty and charges payable in respect of the goods. This is the arithmetic that surprises businesses: the fine is a separate amount layered on top of the underlying liability, and the floor is set by reference to what section 129 would have cost.
What happens if nothing is paid
Where the fine and the amounts payable are not paid, the goods do not sit indefinitely.
On confiscation, title vests in the Government and the proper officer takes and retains possession, with every officer of police required to assist on request. Where the fine and other charges are not paid within three months of the order — or such further time as may be allowed — the goods may be disposed of and the sale proceeds paid to the Government.
Three months is not long for a business trying to arrange funding while its stock is impounded, and the period runs from the order rather than from any later event.
Procedural requirements that decide cases
In practice, challenges to detention and confiscation succeed on procedure more often than on merits. The recurring points:
Timelines under section 129. Notice within seven days of detention; order within seven days of service of the notice. Non-compliance with these is not a technicality.
Opportunity of being heard. Required under both sections, and required separately for each.
Reasons in the order. An order that records a contravention without engaging with the explanation offered is an order without reasons.
Correct identification of the owner. The consequences differ sharply depending on whether the owner comes forward, and misidentification changes the amount payable.
The MOV documentation trail. Gaps or inconsistencies between the statement of the driver, the physical verification report and the detention order undermine the foundation of the proceeding.
Valuation. Both the 50 per cent-of-value computation under section 129 and the market value ceiling under section 130 depend on a valuation. An unexplained valuation is challengeable.
This is a recurring feature of tax litigation in this area: the procedural point decides the case more often than the merits do.
Appeals and pre-deposit
An order under section 129(3) is appealable to the Appellate Authority under section 107. For an appeal against such an order, the pre-deposit required is 25 per cent of the penalty, which is higher in proportion than the 10 per cent applicable to ordinary tax demands — a point that materially affects the decision whether to pay and move on or to contest.
An order of confiscation under section 130 is likewise appealable, and the ordinary appellate route through the Appellate Authority and thereafter the Appellate Tribunal is available. Given the three-month disposal timeline, an appeal is frequently accompanied by an urgent application in respect of the goods themselves.
The route beyond the Appellate Authority is set out in our note on the GST appeal structure.
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