Summary: The Allahabad High Court in Maruti Enterprises Vs State of U.P. and another held that GST authorities of a transit State cannot detain goods or impose penalties under Section 129 of the GST Acts when the goods merely pass through that State without any tax implication arising there. In this case, dried Areca nuts were transported from West Bengal to Delhi with a valid e-Way Bill and physical tax invoice, but were intercepted in Uttar Pradesh due to absence of an e-Tax Invoice under Rule 48 of the CGST Rules. The Court observed that the transaction neither originated nor terminated in Uttar Pradesh and there was no allegation of fake goods, bogus invoices, or tax evasion within the State. Therefore, U.P. authorities lacked jurisdiction to levy penalties. The Court further ruled that the purchaser cannot be penalized for failure of the supplier to generate an e-Invoice, since that obligation depends upon supplier turnover and lies within the supplier’s exclusive knowledge. Consequently, the writ petitions were allowed.
Brief facts: The present petitions have been filed challenging the individual penalty orders passed against the petitioners, under Section 129(1)(d) of the GST Act, 2017 (hereinafter referred to as the “State Act”), read with the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) and the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the “IGST Act”).
a. The petitioner, M/s Maruti Enterprises, is registered under the Delhi Goods and Services Tax Act, 2017 (hereinafter referred to as “Delhi Act”) bearing GSTIN No. 07ACCFM9401F1ZF. The petitioner purchased 30,100 kgs of dried Areca nuts from M/s A.K. Enterprises, a person registered under the West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the “West Bengal Act”), bearing GSTIN No.
19FGDPR7364N1ZF.
b. The said transaction is covered by Tax Invoice-cum-Challan No. AKE/25-26/19. Those goods are described to have been dispatched by
road, on truck bearing No. HR-61E-7511, against e-Way Bill No. 881632659464.
c. Thus, the goods started their journey from Falakata in West Bengal to New Delhi, accompanied with Tax Invoice and e-Way bill. When the goods reached District Gautam Buddh Nagar in the State of Uttar Pradesh, (which according to the petitioner was near the exit point in the State of U.P.), and were set to enter the State of Delhi, they were intercepted by respondent no. 2, on 24.01.2026. Against Interception Memo thus issued, physical verification was conducted on 26.01.2026. Thereafter, objection arose that the goods were not accompanied with e-Tax Invoice, as mandated under the Rule 48 of the CGST Rules, 2017 (hereinafter referred to as the Central Rules). It may be noted, parallel Rules exist in all the States including State of West Bengal, State of Uttar Pradesh and the State of Delhi.
d. Though, reply was submitted to the Show Cause Notice dated 29.01.2026 issued under section 129(3) of the GST Act, it remains admitted to the petitioner that the supplier M/s A.K. Enterprises had not issued e-Tax Invoice to the petitioner. The petitioner describes it as a technical defect. The detaining authority acquired further information through the Common Portal that the petitioner was not registered to trade in the commodity dried Areca Nuts. Also, its registration has been suspended after filing of the writ petition. Further, the supplier dealer M/s A.K. Enterprises has obtained supplies of dried Areca Nuts from such firms, whose registration had either been suspended or cancelled.
Thus, rejecting the explanation furnished by the petitioner the goods have been detained and penalties imposed as described above. In such
facts, upon the writ petition being filed, affidavits have been exchanged and parties heard.
Courts observations:
The issues to be considered at this stage are as under:
(i). Whether the State GST authorities of State of Uttar Pradesh have any jurisdiction vested in them, to detain goods and impose penalties referable to IGST Act, Central Act and the State Act, with respect to transaction of inter-state sale of goods, originating in one State and terminating in another State, excluding the State of Uttar Pradesh, for the only reason that such goods are passing through, using the State of Uttar Pradesh as a transit State.
(ii) Whether provisions of sections 6, 68, 69, 129 of the State Act and Central Act read with Section 4 and 20(3) of the IGST Act, read with Rule 138A, 138B and 138C of the Central Rules confer jurisdiction on the GST authorities of the State of Uttar Pradesh to detain goods and impose penalties, above noted, on any anomaly in the transaction noted, though such goods are only transiting through the State of Uttar Pradesh.
The matter was discussed in length with section 129 of CGST , sections 5, 7, 10 of IGST act,, Rules 138A, 138B, 138C of CGST rules, Rules 48(4),48(5) of CGST rules, section 4 of IGST act mentioned and discussed in detail
Judgements quoted: It is an admitted fact that the goods originated from and are destined to a place, both outside U.P. It is so, because if there is no amount of “tax payable” on such goods (in the State of U.P.), there may not arise any levy of penalty inside the State of U.P. In absence of any allegation or finding of goods being different, and in absence of any doubt as to the e-Way Bill, it is undoubted that the goods originated from the State of West Bengal and were meant for supply in the State of Delhi. In absence of the levy provision (under IGST Act), being applicable to such transaction, (on admitted facts), no tax may become payable in the State of U.P.- In J.K. Synthetics Ltd. Vs. Commercial Taxes Officer, (1994) 4 SCC 276 if we were to allow State GST authorities of a transit State to do more than we are permitting under this order, it may lead to a situation where the goods that begin their journey say in the State of Kerala and are meant to be supplied in Jammu and Kashmir, may traverse the length and breadth of the country through the territories of different constituent States of the
Union and be exposed to repeated penalties, by the State GST authorities of all or many such States though it may not be disputed that the transaction were performed in the State of Kerala for supply of goods in Jammu and Kashmir, in entirety. That would be a gross violation of the constitutional protection guaranteed under Article 301 of the Constitution of India. Unless the element of a levy of a tax in the State (where action is proposed to be taken), is established, such permission may never be constitutional, by way of enforcement of a regulatory law.
Also, we are not in a position to allow the purchaser to be prejudiced for no fault. Issuance of e-Tax Invoice is linked to turnover. That fact is in
the special knowledge of the supplier. The purchase/recipient may neither have the means, nor he may be burdened to enquire about the same, before transacting a purchase. That may be a wholly unreasonable burden cast on the recipient/purchaser. To the extent the physical Tax Invoice is not bogus and its issuance is not doubted, the recipient/purchaser may not be penalised, for no fault.
Supreme Court in M/s Armour Security following issues arose before the Supreme Court :
“I. Whether issuance of summons can be regarded as “initiation of proceedings” within the meaning of Section 6(2)(b) of the CGST Act.”
Approving the co-ordinate bench decision of this Court, in G.K. Trading v. Union of India & Ors. 2020 SCC OnLine All 1907, the Supreme Court discussed the issue of cross-empowerment under section 6 of the CGST laws Golden Traders and Ors. V. Deputy Asst. State Tax and Ors., 2026 SCC OnLine (AP) 803, the Andhra Pradesh High Court
Courts Ruling: To the extent, the transaction for supply of goods originates and is to terminate outside the State of U.P., involving zero tax incidence in the State of U.P., discrepancies noticed and doubts expressed – of e-Tax Invoice not issued; purchases made from unregistered persons (by the supplier), subsequent suspension of registration of the petitioner etc., are extraneous to the core issue.
Consequentially, we answer the two issued framed by us as below:-
(a) to the extent, the respondent GST authorities of the State of U.P. do not dispute that the goods/Areca nuts originated from the State of West Bengal and were being transported to the State of Delhi, as evidenced by a valid e-Way Bill and physical Tax Invoice, to the extent there is not an iota of allegation, either that the goods were different or that they either originated from or were meant for consumption inside the State of U.P. or that the documents produced are bogus, no jurisdiction arose to those authorities to penalise those goods, U.P. being a pure transit State.
(b) in view of complete lack of a foundation – to levy any tax in the State of U.P., on such transaction, on admitted facts, the lack of e-Tax Invoice remains an unexplained anomaly noticed by the GST authorities of the State of U.P., causing no tax effect in the State of U.P. At most, the same may be marked on the documents, produced before those authorities and such fact be communicated to the concerned authorities in the State of West Bengal and Delhi.
In view of the above, the writ petitions are allowed.
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