Understanding the Post-Amendment Scheme of Sections 129 and 130 of the CGST Act
The Shift in the Legal Landscape
The amendments to Sections 129 and 130 of the Central Goods and Services Tax Act, 2017, effective from 1 January 2022, have fundamentally altered the way goods in transit are regulated. Earlier, the absence of a clear demarcation between detention and confiscation often resulted in routine procedural lapses being escalated into severe confiscatory proceedings.
Post amendment, Section 129 now operates as a self-contained code governing detention, seizure, and release of goods during transit. Section 130 has been consciously confined to cases involving deliberate and demonstrable intent to evade tax. The recalibration reflects a policy decision to ensure proportionality in enforcement and to prevent the misuse of confiscation powers for minor contraventions.
What Changed in Section 129
Section 129 underwent a substantive overhaul. The penalty payable for release of goods was increased from 100% to 200% of the tax payable, and the requirement to pay “applicable tax” was removed, converting the provision into a purely penal mechanism.
The omission of sub-section (2) eliminated the statutory remedy of provisional release under Section 67(6), reinforcing the independent nature of Section 129. Most significantly, the amendment to sub-section (6) clarified that non-payment of penalty results in sale of goods for recovery of dues, rather than an automatic transition into confiscation proceedings under Section 130.
How Section 130 Was Delinked from Detention Proceedings
Simultaneous amendments were introduced in Section 130 to sever its procedural and conceptual linkage with Section 129. The deletion of the non obstante clause removed its overriding character, while references to penalties under Section 129 were consciously omitted. Sub-section (3) was also deleted.
These changes placed Section 130 in a subordinate and exceptional role, ensuring that confiscation is no longer a natural corollary of detention, but a distinct proceeding reserved for grave violations.
Legislative Intent Behind the Amendments
The intent behind this restructuring is explicit. During the 39th Meeting of the GST Council held in March 2020, it was proposed that Section 129 be made independent to curb excessive confiscation in transit matters.
This policy objective was reiterated in the Memorandum to the Finance Bill, 2021, which expressly stated that Sections 129 and 130 were being amended to delink their operation. Clauses 108 and 109 of the Bill translated this intent into statutory form, bringing clarity and discipline to GST enforcement.
Judicial Clarity: Panchhi Traders v. State of Gujarat
The post-amendment framework received authoritative judicial interpretation in Panchhi Traders v. State of Gujarat [2025] 181 taxmann.com 540 (Gujarat). The central issue before the Court was whether confiscation under Section 130 could be invoked independently of Section 129 in transit cases.
The Gujarat High Court held that Section 129 is the default provision governing goods in transit. Section 130 can be invoked only where the proper officer forms a clear, evidence-based opinion that the contravention was committed with intent to evade tax. Confiscation, the Court observed, is a measure of last resort, carrying serious civil consequences.
The judgment emphasised that minor procedural lapses or clerical errors cannot justify confiscation. Indicative factors such as forged documents, fake registration, or complete mismatch of goods were cited as circumstances that may establish intent. The Court also clarified that while provisional release under Section 67(6) is no longer available, confiscation proceedings may still be initiated after release if subsequent investigation uncovers incriminating material.
Practical Takeaways for Taxpayers and Authorities
In practical terms, Section 129 now represents the primary enforcement route for transit-related contraventions, with payment of penalty ensuring release of goods. Confiscation under Section 130 demands a significantly higher threshold, both factually and procedurally.
Show cause notices invoking Section 130 without detailed reasoning or factual foundation are vulnerable to challenge. Errors attributable to transporters or third parties cannot automatically be imputed to the taxpayer to establish intent to evade tax. Strict adherence to statutory timelines for forming the opinion on confiscation is mandatory, and delays may invalidate proceedings.
A More Balanced Enforcement Regime
The combined effect of the statutory amendments and the ruling in Panchhi Traders is the creation of a balanced, two-tier enforcement mechanism under GST. Section 129 functions independently as the primary tool for detention and release, while Section 130 is confined to serious, evidence-backed cases of tax evasion.
This framework restores proportionality, limits administrative overreach, and strengthens taxpayer protections, while preserving the State’s ability to act decisively in genuine cases of evasion.