Goods remaining onsite may still be restricted
CGST Rule 139(4) permits an INS-03 prohibition order on the owner or custodian where it is not practicable to seize the goods. The operative restriction covers removal, parting with or otherwise dealing with the goods except with the previous permission of the proper officer or authorised officer who imposed the restriction. Permission from an unrelated officer or an internal manager is not a substitute for the required authority. Continued physical possession is therefore not permission to dispatch, consume or otherwise deal with the covered stock. This guide concerns control of prohibited goods, distinct from a general search guide or a perishable-goods release calculation.
Read the applicable text: CBIC: CGST Rules, rule 139(1)–(5).
Read the actual order and match its scope
Identify the issuing officer, recipient, premises, goods description, quantity, identifiers and any annexures. Compare that scope with warehouse bins and the inventory system. Do not assume all stock of the legal entity is covered, or that an order directed at a batch covers only the quantity appearing in an unrelated sales invoice. Seek clarification of genuine ambiguity and preserve the request. Administrative uncertainty is not a basis for moving potentially covered goods first.
Keep three procedural documents distinct
Under rule 139, INS-01 is an authorisation, INS-02 an order of seizure and INS-03 the prohibition order relevant here. Stock entrusted for safe upkeep after seizure under sub-rule (3) also carries a restriction, but is a different factual route. Record what actually happened. Do not substitute a provisional-release bond or a commercial delivery challan for the previous permission required by the applicable restriction.
Use an internal movement block with a permission trail
Flag covered items in stock and dispatch records, brief warehouse personnel and require review of proposed transfers, processing or disposal. These are practical controls rather than a statutory software requirement. A permission request should identify goods, quantity, purpose, destination, proposed handling and the relevant order. Keep evidence of the officer's decision and its conditions. Requesting permission does not by itself establish that permission was granted.
Reconcile custody without silently changing ownership conclusions
A prohibition controls dealings with the goods; it does not, merely by its existence, determine the accounting ownership of every item or extinguish contractual customer rights. Keep customer-owned or third-party stock identifiable and seek case-specific directions where competing obligations arise. A production requirement or customer deadline should be explained in the request, not treated as an automatic exception to the order.
Close changes through documented authority
Maintain opening covered quantity, movements actually permitted and completed, remaining restricted quantity and any discrepancies. Preserve the order and later permissions or directions together. An absence of physical collection by officers is not proof of release. This article does not prescribe an invented automatic expiry or a fixed response period for permission applications; assess the underlying proceeding and available legal remedies separately.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Covered stock and free stock
The warehouse has 1,000 units, and the actual order clearly identifies 600 of them. The control register separates 600 covered units and 400 outside that identified scope. This arithmetic does not authorise movement where identification is ambiguous or another restriction applies.
Illustrative example 2: Request is larger than the evidence of permission
A company requests permission to move 150 covered units. The written permission covers 100. The unsupported balance is 50 units; the request total must not be entered as the permitted quantity.
Illustrative example 3: Physical roll-forward
Opening restricted quantity is 600 units. Permission covers a transfer of 80 units and records prove that transfer occurred. Assuming no other changes, 520 units remain under the original restriction. A permission alone, before actual movement, would not reduce the physical stock balance.
Illustrative example 4: Mixed customer dispatch
A proposed 200-unit dispatch contains 140 clearly unrestricted units and 60 covered units. At a fictional carrying amount of ₹500 per unit, the covered portion represents ₹30,000. A customer invoice for all 200 does not substitute for previous permission over those 60 units.
Illustrative example 5: Stock-count discrepancy
The order-linked register shows 520 units remaining, while a physical count finds 515. Five units, approximately 0.96% of the register quantity, require investigation. Do not insert a routine stock-loss journal and assume the legal custody question is resolved.
Illustrative example 6: Permission conditions are quantity-specific
Permission allows two named batches of 40 and 60 units, totalling 100. Dispatch records show 40 and 55, totalling 95. Five permitted units were not dispatched and remain in the physical reconciliation; an unused permission is not a completed movement.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Obtain the full order | INS-03, annexures, service and officer particulars. |
| 2 | Identify the procedural route | Prohibition versus authorisation, seizure or entrusted custody. |
| 3 | Map covered goods | Batch, quantity, location and distinguishing identifiers. |
| 4 | Resolve scope ambiguity | Written clarification requests and supporting records. |
| 5 | Flag internal restrictions | Warehouse, dispatch and production controls. |
| 6 | Review proposed dealings | Quantity, purpose, destination and effect on covered stock. |
| 7 | Seek previous permission | Goods-specific request linked to the order. |
| 8 | Verify actual authority | Officer's decision, covered quantity and conditions. |
| 9 | Record completed movements | Handover, transport or processing evidence as applicable. |
| 10 | Reconcile remaining custody | Physical count, register and later directions. |
Sixteen practitioner FAQs
1. Why can stock remain with the company after INS-03?
Rule 139(4) addresses the situation where seizure is not practicable and a prohibition is served instead.
2. Does remaining onsite mean unrestricted possession?
No. The order restricts dealings with the covered goods.
3. Is only physical removal covered?
The rule also refers to parting with or otherwise dealing with the goods.
4. Can production consumption be ignored because goods stay inside?
Do not assume that. Assess whether it is dealing with covered goods and obtain appropriate previous permission.
5. Does a customer order create an automatic exception?
No. Explain the operational need through the appropriate permission request.
6. Does requesting permission mean it is granted?
No. Preserve the actual decision and conditions.
7. Can permission for 100 units be used for a 150-unit movement?
Not without further authority covering the excess.
8. Are INS-01 and INS-03 interchangeable?
No. They perform different functions under rule 139.
9. Does INS-02 identify the same procedural event?
INS-02 is the seizure order; record the actual route rather than conflating forms.
10. Can a delivery challan override the prohibition?
No. Commercial movement documentation does not replace the required authority.
11. Must every item in the warehouse be assumed covered?
Read the actual scope; do not overstate it or ignore ambiguity.
12. Should third-party stock be separately identified?
Yes. Preserve ownership and custody evidence and obtain directions where obligations conflict.
13. Does a permission reduce physical stock immediately?
Only completed movement changes physical quantities. Track permission and execution separately.
14. Can normal stock adjustments close a custody discrepancy?
No. Investigate and address the order-linked discrepancy as well.
15. Is a fixed automatic expiry supplied by this guide?
No. Examine the applicable proceeding and actual directions rather than inventing one.
16. What is the practical closing record?
The original order, goods mapping, permissions, completed movements and remaining covered stock.