The Karnataka High Court has directed GST authorities to act under Section 129(6) of the Central Goods and Services Tax Act, 2017 and the Karnataka GST Act to initiate the sale of seized goods where the statutory conditions for disposal are met, particularly when the goods are hazardous or likely to depreciate in value.

The bench of Justice B M Shyam Prasad passed the order while disposing of a writ petition concerning a 14-wheeler tanker carrying bulk bitumen that had been intercepted by State GST authorities. 

The bench directed the department to issue a public notice for sale and serve notice on the owner of the seized goods, with the entire process to be undertaken at the earliest and, in any event, within five weeks from the date of the order.

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The petitioner/assessee was the owner of a 14-wheeler tanker. The vehicle had been hired by SVP Petro Products for transporting bulk bitumen.

The conveyance was intercepted by the State GST authorities, following which orders were passed under Section 129(3) of the CGST/KSGST Acts. A penalty of ₹23,86,590 was imposed in relation to the detention of the goods and conveyance.

The petitioner, being the transporter rather than the owner of the goods, sought release of the vehicle. The High Court noted that under the first proviso to Section 129(6), a transporter is entitled to release of the conveyance upon payment of the penalty imposed under Section 129(3) or ₹1 lakh, whichever is less.

Accordingly, the petitioner paid ₹1 lakh and became entitled to release of the conveyance.

The petitioner subsequently approached the High Court contending that although the penalty order had been passed approximately two and a half months earlier, the authorities had not taken steps to sell or otherwise dispose of the seized goods.

The State’s Additional Government Advocate submitted that the goods had not been brought to sale because the period for filing an appeal may not have expired. The High Court, however, examined this explanation in the context of the specific statutory requirements under Section 129(6).

The Court examined Section 129(6), which provides that where the person transporting the goods or the owner fails to pay the penalty under Section 129(1) within fifteen days from receipt of the order passed under Section 129(3), the detained or seized goods or conveyance become liable to be sold or otherwise disposed of in the prescribed manner for recovery of the penalty.

The provision also contains an important safeguard for transporters. The conveyance is required to be released upon payment by the transporter of the penalty under Section 129(3) or ₹1 lakh, whichever is less.

A further proviso permits the proper officer to reduce the fifteen-day period where the detained or seized goods are perishable, hazardous in nature, or likely to depreciate in value with the passage of time.

The High Court observed that the statutory framework contemplated action by the authorities once the relevant fifteen-day period had elapsed if the consignor failed to pay the penalty.

Importantly, the Court noted that the fifteen-day period could itself be reduced where the seized goods were perishable, hazardous or likely to lose value over time.

The bench rejected the implication that the pendency or expiry of an appellate period could, by itself, justify indefinite retention of the seized goods. The Court observed that the statute places an obligation on the authorities to act within the prescribed framework and, where the goods are perishable, hazardous or depreciating, to take action even earlier.

A significant factor in the Court’s decision was the nature of the seized goods.

The High Court specifically recorded that the seized goods were “undoubtedly inflammable” and therefore hazardous. It also noted the potential damage that could be caused to the conveyance because of the nature of the goods.

This finding brought the case squarely within the statutory exception allowing the period for disposal to be reduced where goods are hazardous or likely to deteriorate or depreciate in value.

While disposing of the petition, the High Court directed the authorities to exercise their powers under the proviso to Section 129(6) for sale of the seized goods.

However, the Court made it clear that the sale process must be undertaken after following due notice requirements. The authorities were directed to issue a public notice and, if the owner of the seized goods did not avail the appellate remedy despite such publication, proceed with the sale.

The Court further directed that a copy of the sale notice should also be served on the consignor.

The Court ultimately disposed of the writ petition by directing the authorities to bring the goods to sale by issuing a public notice and notifying the owner at the earliest.

The Court imposed a definite outer timeline, directing that the process be completed within five weeks from the date of the order.

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