2026 Supreme(All) 610

IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
SAUMITRA DAYAL SINGH, SWARUPAMA CHATURVEDI, JJ.
M/s Maruti Enterprises – Appellant
Versus
State of U.P. and Another – Respondents
Writ Tax Nos. 1423, 1573, 2001, 2445, 2451 of 2026
Decided On : 14-05-2026

GST authorities in a transit state lack jurisdiction to detain goods or impose penalties on inter-state transactions that originate and terminate outside their territory, as enforcement powers are contingent upon the potential for tax liability or evasion within that specific jurisdiction.

Headnote:(A) Tax Law - Goods and Services Tax - Jurisdiction of authorities in transit states - Whether GST authorities of a transit state have the power to detain goods and impose penalties for inter-state transactions originating and terminating outside their jurisdiction - Provisions under the relevant Acts regarding inspection and detention of goods in transit (Sections 68 and 129 of the respective State and Central Acts) do not confer power to penalize for alleged documentary deficiencies when no tax liability arises within the transit state. (Paras 15, 16, 26, 35)

(B) Cross-empowerment - Concept and scope - Statutory provisions for cross-empowerment are designed to facilitate administrative synergy between the Union and the States to address tax evasion through a single interface; these provisions do not authorize tax authorities of one state to initiate enforcement proceedings against entities and transactions that fall under the administrative jurisdiction of another state. (Paras 28, 29, 39, 40)

(C) Constitutional protection - Article 301 of the Constitution - Freedom of trade and commerce - State regulations must remain within the bounds of reasonableness; imposing penalties for transactions that do not originate, terminate, or incur tax liabilities within the transit state constitutes an unjustified restriction on inter-state trade. (Paras 36, 45)

Facts of the case:
The petitioners challenged penalty orders issued by authorities of a state during the transportation of goods from one state to another. Upon interception in the transit state, the authorities detained the goods and imposed penalties primarily due to the absence of a mandatory electronic tax invoice, despite the admitted fact that no tax liability arose within the transit state and the transaction originated and terminated outside its borders.

Findings of Court:
The court observed that while authorities in a transit state possess the power to conduct inspections to verify the movement of goods, they lack jurisdiction to levy penalties or initiate confiscation proceedings for transactions purely in transit where no tax nexus exists within that state. Discrepancies should be communicated to the relevant jurisdictional authorities rather than disrupting the movement of goods through coercive penalties. (Paras 34, 45)

Issues: The main issues addressed were whether GST authorities of a transit state have the jurisdiction to detain goods and impose penalties on inter-state transactions that do not involve any tax incidence in that state, and whether the provision for cross-empowerment extends to authorizing state-to-state enforcement actions.

Ratio Decidendi: The court ruled that in the absence of tax liability within the transit state, proceedings under the applicable GST laws for detention and penalties are invalid. The cross-empowerment framework is specifically restricted to the relationship between the Union and individual states for intelligence-based enforcement and cannot be widened to permit transit states to adjudicate upon or penalize inter-state trade occurring entirely outside their tax-levying authority. (Paras 35, 40, 45)

Result: Petitions allowed; penalty orders quashed.

Table of Content
1. factual background involving seizure of transit goods. (Para 1 , 2 , 3 , 4)
2. arguments on jurisdictional power of transit state authorities. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12)
3. legislative framework and statutory provisions governing goods in transit. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25)
4. transit states lack jurisdiction to penalize without tax nexus. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43)
5. final holding: penalty orders quashed as transit state lacks jurisdiction. (Para 44 , 45 , 46 , 47)

JUDGMENT :

1. Heard learned counsel for the parties and perused the record.

2. 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").

3. The brief details of the penalty orders impugned in the individual petitions, are as under:

4. Facts are similar. Since, additional ground exists in Maruti Enterprises, facts relevant to that case are being noted below:

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.

e. 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.

5. 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 g

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