Goods in transit in India may be detained or seized under Section 129 of the Central Goods and Services Tax Act, 2017 (CGST Act) and released on payment of penalty — 200% of the tax payable where the owner comes forward, or the higher of 50% of the value of the goods and 200% of the tax where the owner does not. Since 1 January 2022, Section 130 confiscation is a decoupled, standalone proceeding.
Background — a fast-clock enforcement regime with a paper trail
In-transit enforcement is the one GST proceeding where commercial urgency and legal process collide. A detained truck stops revenue for the consignor, the consignee and the transporter simultaneously, which is precisely why the statute now runs on short, hard deadlines and why CBIC standardised the paperwork into an eleven-form chain.
Two structural changes define the current regime. First, the Finance Act, 2021 (Act 13 of 2021), whose relevant provisions were brought into force on 1 January 2022 by Notification No. 39/2021-Central Tax dated 21 December 2021, rewrote Section 129 into a penalty-only provision with a seven-day notice and seven-day order clock, and decoupled Section 130 confiscation from it. Second, CBIC's procedural circulars — issued under Section 168(1) CGST Act and still operative — supply the forms, the inspection time limits and a proportionate-response rule for minor documentary errors. This explainer covers the Central-level framework only; state enforcement practice, Advance Ruling orders and Appellate Tribunal procedure are outside scope.
Interception, inspection and the MOV chain
Section 68 CGST Act requires the person in charge of a conveyance carrying a consignment above the prescribed threshold to carry the prescribed documents and empowers the proper officer to intercept and inspect. Rule 138A of the CGST Rules, 2017 fixes what must be carried: the invoice, bill of supply or delivery challan, plus a valid e-way bill in physical, electronic or RFID-mapped form. The e-way bill framework itself sits in Rules 138 to 138D, substituted by CGST_27_2017 and comprehensively re-substituted by CGST_12_2018; FAQ_eway-bill-system_2019 is CBIC's own primer on the system.
CIR_41_2018 is the anchor SOP. Per that circular, documents-only verification comes first: if no prima facie discrepancy appears, the conveyance moves on. Physical inspection triggers the form chain:
| Step | Form | Trigger / clock |
|---|---|---|
| 1 | MOV-01 | Driver's statement recorded |
| 2 | MOV-02 | Order for physical verification; EWB-03 Part A uploaded within 24 hours |
| 3 | MOV-03 | Written extension of inspection period by the Commissioner or authorised officer |
| 4 | MOV-04 | Physical verification report; EWB-03 Part B within 3 days of verification |
| 5 | MOV-05 | Release order (no discrepancy, post-payment, or against security) |
| 6 | MOV-06 | Detention order under Section 129(1) |
| 7 | MOV-07 | Section 129(3) notice with penalty calculation tables |
| 8 | MOV-08 | Bond plus bank guarantee for release against security |
| 9 | MOV-09 | Speaking order under Section 129(3), uploaded as DRC-07 |
| 10 | MOV-10 | Section 130 confiscation notice |
| 11 | MOV-11 | Confiscation order; redemption window not exceeding three months |
CIR_41_2018 originally set a three-working-day inspection limit from MOV-02, extendable only by written MOV-03 permission. CIR_49_2018 tightened that to three days — not working days — corrected the MOV-05 release wording, and added two important protections. Under Rule 138C(2), once physical verification is done at one check-post in a State, no further physical verification of the same conveyance is permitted in that State or any other unless fresh specific information about tax evasion is received. And the circular states the partial-detention principle: on a conveyance carrying 25 consignments where 20 have valid e-way bills, detention is confined to the 5 non-compliant consignments; the compliant 20 cannot be held.
Two more operational points from CIR_41_2018 carry litigation value. Demands under MOV-09 and MOV-11 are entered in the Electronic Liability Register and discharged by debit of the cash or credit ledger under Section 49 CGST Act, with a temporary portal ID created for unregistered persons (cash ledger only). And where the CGST order is passed, a corresponding order must be passed by the same officer under the State or Union Territory GST Act and, where applicable, the Compensation Cess Act; the procedure applies mutatis mutandis under the IGST Act. Absence of the parallel orders is a jurisdictional and recovery defect.
The penalty structure after 1 January 2022
The Finance Act, 2021 substituted Section 129(1) so that release is on payment of penalty alone — the earlier "applicable tax and penalty" formulation is gone. The current structure distinguishes taxable from exempted goods and owner from non-owner:
| Goods | Owner comes forward | Owner does not come forward |
|---|---|---|
| Taxable | Penalty = 200% of the tax payable on the goods | Penalty = higher of 50% of the value of the goods and 200% of the tax payable |
| Exempted | 2% of the value of goods or ₹25,000, whichever is less | 5% of the value of goods or ₹25,000, whichever is less |
Release against security equivalent to the amount payable remains available, executed through the MOV-08 bond and bank guarantee, with the security adjusted against the final Section 129(3) demand. Section 129(3) fixes the clock: notice within seven days of detention or seizure, and order within seven days of service of the notice. Section 129(4) bars determination without a hearing. If the penalty is unpaid fifteen days after receipt of the order, the goods or conveyance become liable to sale or disposal, with the conveyance released on payment of the penalty or ₹1,00,000, whichever is less.
Decoupling of Section 130. Before 1 January 2022, non-payment under Section 129 escalated automatically into confiscation. The Finance Act, 2021 substituted the opening words of Section 130(1), removed the escalation route from Section 129(6), and substituted the proviso to Section 130(2) so that the fine in lieu of confiscation may not exceed the market value of the confiscated goods less the tax chargeable thereon. Confiscation is therefore a separate proceeding on its own statutory triggers, requiring its own MOV-10 notice, its own mandatory hearing, and its own MOV-11 order. Per CIR_41_2018, on passing MOV-11 the title of the goods (and separately the conveyance) transfers to the Central Government, any earlier MOV-09 order on the same goods stands withdrawn, and non-redemption within the three-month window leads to public auction — accelerated for perishable or hazardous goods.
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Minor discrepancies: the proportionality rule
CIR_64_2018 is the most-used taxpayer-side authority in this area. It separates two scenarios. Where a consignment carries an invoice but no e-way bill, or the e-way bill is invalid because Part-B was not furnished, Section 129 proceedings are proper — that is a substantive breach of Rule 138A, subject to the 50-kilometre carve-out in Explanation (2) to Rule 138(3).
But where the consignment carries both a valid document and a valid e-way bill, six enumerated classes of minor discrepancy must not trigger Section 129:
- Spelling mistakes in the consignor or consignee name where the GSTIN is correct.
- PIN-code errors where the address is otherwise correct, provided the error does not extend e-way bill validity.
- Consignee address errors where locality and other details remain correct.
- Errors in one or two digits of the document number recorded in the e-way bill.
- 4-digit or 6-digit HSN errors where the first two digits and the tax rate are correct.
- Errors in one or two digits or characters of the vehicle number.
In each case the officer must instead levy a flat general penalty of ₹500 each under Section 125 CGST Act and the State GST Act (₹1,000 under the IGST Act) per consignment, in FORM GST DRC-07 — and must report every such consignment to the controlling officer weekly. That weekly report is discoverable and is often the fastest route to establishing that a comparable lapse was treated as minor. CIR_61_2018 covers the adjacent transporter-godown situation: a transporter's godown declared as an additional place of business of the consignee preserves e-way bill validity for goods stored there.
Search, seizure and premises access
Section 129 governs goods in transit. Where enforcement moves to premises, three other provisions apply. Section 67 authorises inspection, search and seizure on the authorisation of a Joint Commissioner or above; CGST_15_2017 notified the Third Amendment Rules carrying the inspection, search, seizure, demand and recovery forms. Section 71 gives any authorised officer access to a registered person's place of business for inspection of records. And CGST_27_2018 notifies, under Section 67(8), a Schedule of 17 categories of goods liable to expeditious disposal after seizure — salt and hygroscopic substances, raw hides, newspapers, petroleum products, pharmaceutical products, fireworks, red sander, sandalwood, all taxable goods in Customs Tariff Chapters 1 to 24, and any goods where provisional release under Section 67(6) has not been taken within one month of bond execution.
Two instructions constrain officer conduct. INS_04_2019 communicates the Supreme Court's ruling in State of Uttar Pradesh v. M/s Kay Pan Fragrance Pvt. Ltd., Civil Appeal Nos. 8942 and 8944 of 2019, holding that release of seized goods must follow Section 67 read with Rule 140 (bond and security) and that High Court orders prescribing alternative interim-release conditions are not to be given effect. INS_01_2020 re-issues the search-conduct guidelines. And INS_01_2022 is the key protection during investigation: a DRC-03 deposit is voluntary, initiated only by the taxpayer through its own portal credentials; recovery may be made only under Section 79 after notice and adjudication; and coerced deposits must be enquired into with disciplinary consequences.
Practitioner implications
Build the timeline first, arguments second. Every clock in this regime is short and every breach is documentary: MOV-02 to MOV-04 within three days absent an MOV-03 extension; EWB-03 Part A within 24 hours; Part B within three days; the Section 129(3) notice within seven days; the order within seven days of the reply. Request portal proof of each upload — absence is a clean procedural ground, and CIR_41_2018 itself invites the objection.
Elect owner status deliberately. Coming forward as owner caps the penalty at 200% of tax. Not coming forward exposes the consignment to the higher of 50% of value and 200% of tax, which on low-margin, high-value goods is dramatically worse. Where the consignee is the owner, say so on the record early.
Use MOV-08 for time-critical consignments. A bond with bank guarantee under Section 129(1)(c) releases the goods while the Section 129(3) determination continues, and the security is adjusted against the final demand. For perishables and project-critical inputs the carrying cost of delay usually exceeds the guarantee cost.
Resist automatic escalation to Section 130. Since 1 January 2022, confiscation is not the default consequence of non-payment under Section 129. Insist on independent Section 130 triggers, a separate MOV-10 notice and a hearing, and test whether the MOV-11 fine respects the market-value-less-tax cap.
Get the pre-deposit right on appeal. For a Section 129(3) order, the Section 107(6) proviso requires 25% of the penalty, not 10% of disputed tax. Filing on the wrong basis risks the appeal being treated as defective within the three-month limitation window.
Frequently Asked Questions
Q: What penalty applies when goods are detained in transit under Section 129 of the CGST Act?
Under Section 129(1) of the CGST Act, 2017 as substituted by the Finance Act, 2021 with effect from 1 January 2022, goods are released on payment of penalty equal to 200% of the tax payable where the owner comes forward, or the higher of 50% of the value of the goods and 200% of the tax payable where the owner does not. For exempted goods the amount is 2% of value or ₹25,000, whichever is less, where the owner comes forward, and 5% of value or ₹25,000, whichever is less, where the owner does not. Release against security equivalent to that amount is available through a bond and bank guarantee in FORM GST MOV-08.
Q: What is the timeline for a Section 129 detention notice and order?
Section 129(3) of the CGST Act, 2017 requires the proper officer to issue a notice within seven days of detention or seizure specifying the penalty payable, and to pass an order within seven days from service of that notice. Section 129(4) bars determination of penalty without an opportunity of being heard. If the penalty is not paid within fifteen days of receipt of the order, the goods or conveyance become liable to be sold or otherwise disposed of, with the conveyance released on payment of the penalty or ₹1,00,000, whichever is less.
Q: How is Section 130 confiscation different from Section 129 detention after 1 January 2022?
They are now independent proceedings. Before the Finance Act, 2021 amendments took effect, non-payment under Section 129 escalated automatically to Section 130 confiscation. The amendment substituted the opening words of Section 130(1), removed the escalation route from Section 129(6), and substituted the proviso to Section 130(2) so that the fine in lieu of confiscation may not exceed the market value of the confiscated goods less the tax chargeable thereon. Section 129 now concludes with penalty and sale; Section 130 requires its own notice, hearing and order.
Q: What are the FORM GST MOV-01 to MOV-11 forms used for in a GST detention case?
CBIC Circular No. 41/15/2018-GST dated 13 April 2018 prescribes the sequence: MOV-01 driver's statement; MOV-02 physical verification order; MOV-03 written extension of the inspection period; MOV-04 verification report; MOV-05 release order; MOV-06 detention order; MOV-07 Section 129(3) notice with penalty calculation; MOV-08 bond with bank guarantee for release against security; MOV-09 speaking order; MOV-10 Section 130 confiscation notice; MOV-11 confiscation order with a redemption window not exceeding three months. Part A of FORM GST EWB-03 is uploaded within 24 hours of MOV-02 and Part B within three days of physical verification.
Q: Can goods be detained for a minor error in the e-way bill?
No. CBIC Circular No. 64/38/2018-GST dated 14 September 2018 directs that where a consignment carries both a valid document and a valid e-way bill, six classes of minor discrepancy must not trigger Section 129 proceedings: name spelling mistakes with a correct GSTIN; PIN-code errors that do not extend e-way bill validity; consignee address errors where locality is correct; one-or-two-digit document number errors; 4-digit or 6-digit HSN errors with correct first two digits and correct tax rate; and one-or-two-character vehicle number errors. A flat general penalty of ₹500 each under Section 125 of the CGST Act and the State GST Act — ₹1,000 under the IGST Act — applies per consignment in FORM GST DRC-07.
Q: What pre-deposit is required to appeal a GST detention order?
An appeal to the Appellate Authority is filed under Section 107 of the CGST Act, 2017 within three months of communication of the order. Section 107(6) requires the admitted liability in full plus 10% of the disputed tax; but for an order passed under Section 129(3), the proviso inserted by the Finance Act, 2021 with effect from 1 January 2022 requires a pre-deposit of 25% of the penalty. Because a Section 129 order is a penalty order rather than a tax demand, the 25%-of-penalty figure governs.
Q: Can a tax officer demand payment through DRC-03 during a search or inspection?
No. CBIC Instruction No. 01/2022-23-GST dated 25 May 2022 confirms that the DRC-03 route under Sections 73(5) and 74(5) of the CGST Act, 2017 is initiated only by the taxpayer using its own portal credentials and is inherently voluntary. Recovery may be made only under Section 79, and only after a notice and an adjudication order. Officers must inform taxpayers of the option but must not coerce a deposit, and any complaint of coercion must be enquired into immediately, with strict disciplinary action for confirmed wrongdoing.
Sources
- Primary: CBIC Circular No. 41/15/2018-GST dated 13 April 2018 — interception, inspection, detention, release and confiscation SOP with FORM GST MOV-01 to MOV-11 (
CIR_41_2018) — cbic-gst.gov.in - CBIC Circular No. 49/23/2018-GST dated 21 June 2018 — "three days" substitution, Rule 138C(2) single-verification rule, partial-detention principle (
CIR_49_2018) — taxinformation.cbic.gov.in - CBIC Circular No. 64/38/2018-GST dated 14 September 2018 — six minor-discrepancy classes and the ₹500/₹1,000 Section 125 penalty (
CIR_64_2018) — cbic-gst.gov.in - CBIC Circular No. 61/35/2018-GST — e-way bill for goods stored in a transporter's godown (
CIR_61_2018) — taxinformation.cbic.gov.in - Notification No. 15/2017-Central Tax — CGST (Third Amendment) Rules, 2017; inspection, search, seizure, demand and recovery forms (
CGST_15_2017) — cbic-gst.gov.in - Notification No. 27/2017-Central Tax and Notification No. 12/2018-Central Tax — e-way bill framework, Rules 138 to 138D (
CGST_27_2017,CGST_12_2018) — cbic-gst.gov.in - Notification No. 27/2018-Central Tax dated 13 June 2018 — 17 categories of goods for expeditious disposal under Section 67(8) (
CGST_27_2018) — cbic-gst.gov.in - CBIC Instruction No. 04/2019 dated 9 December 2019 — State of Uttar Pradesh v. M/s Kay Pan Fragrance Pvt. Ltd., Civil Appeal Nos. 8942 and 8944 of 2019; release of seized goods strictly under Section 67 read with Rule 140 (
INS_04_2019) — taxinformation.cbic.gov.in - CBIC Instruction No. 01/2020 — conduct of search operations (
INS_01_2020) and CBIC Instruction No. 01/2022-23-GST dated 25 May 2022 — DRC-03 during search is voluntary; no recovery without adjudication (INS_01_2022) — taxinformation.cbic.gov.in - CBIC flyer on the electronic way bill system (
FAQ_eway-bill-system_2019) — cbic-gst.gov.in - Statutory basis: Central Goods and Services Tax Act, 2017 — Sections 49, 67, 68, 71, 79, 107, 122, 125, 129, 130, 168(1), as amended by the Finance Act, 2021 (Act 13 of 2021) brought into force on 1 January 2022 by Notification No. 39/2021-Central Tax dated 21 December 2021 — on India Code
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