Gujarat High Court Rejects Shreeji Steel Writ and Upholds GST Officer Authority Under Rule 138B

In a significant ruling that reinforces the procedural framework governing GST inspections, the Gujarat High Court dismissed a writ petition filed by Shreeji Steel challenging confiscation proceedings initiated against its goods. The bench, comprising Justice A.S. Supehia and Justice Vaibhavi D. Nanavati, held that the State Tax Officer who conducted the physical verification of the petitioner’s vehicle was duly authorised under Rule 138B of the Central Goods and Services Tax Rules, 2017. The court further observed that the petitioner had an efficacious alternative statutory remedy under Section 107 of the CGST Act, which militated against any interference under writ jurisdiction.

The Dispute Over Vehicle Verification

Shreeji Steel, a trader in waste and scrap of cast iron, had purchased goods from A.S. Construction, Gandhidham. The goods were supplied directly to A.K. Tools Industries through a vehicle bearing registration number PB 13 BR 9947. On February 13, 2025, the vehicle was intercepted by the State Tax Officer (1), Kachchh Mobile Squad, at Radhanpar Highway near Samakhiyali. The officer carried out a physical verification and subsequently issued a verification report in Form GST MOV-04 and a detention order in Form GST MOV-06.

Thereafter, a show-cause notice in Form GST MOV-10 was issued under Section 130 of the CGST Act, proposing confiscation of the goods and conveyance. The proposed penalty was ₹2,47,466, the fine in lieu of confiscation of goods was ₹13,74,812, and the proposed fine for the conveyance was ₹2,47,468.

Procedural History and Remand

The matter had previously been challenged before the High Court. After the court remanded the case for reconsideration, a fresh MOV-10 notice was issued on January 15, 2026. Shreeji Steel filed its reply on February 9, 2026, and the authorities passed the final MOV-11 order on March 2, 2026. The company then approached the High Court again, arguing that the officer who verified the vehicle lacked proper authorisation under Rule 138B, that the same officer could not both issue the notice and adjudicate the matter, and that documents relied upon by the authorities were not supplied, violating principles of natural justice.

The Revenue opposed the petition, pointing out that the adjudication order was appealable under Section 107 and that the supplier A.S. Construction’s registration had subsequently been cancelled, with its office found closed during physical verification.

Court’s Reasoning on Rule 138B

The court examined Rule 138B, which permits the Commissioner or an officer empowered by him to authorise a proper officer to intercept a conveyance and verify the e-way bill. In cases involving specific information about tax evasion, another officer can conduct physical verification after obtaining the necessary approval.

The bench found that the officer who inspected Shreeji Steel’s vehicle had the required authorisation. “Upon examination of the documents on record, we find that there is no violation of the said provisions, as the physical verification of the conveyance was carried out by the proper officer authorised by the Commissioner,” the court observed. The challenge on the ground of Rule 138B was therefore rejected.

Natural Justice and Alternative Remedy

The court also found no violation of natural justice. Forms GST MOV-04 and MOV-06 had been supplied to the person in charge of the conveyance at the time of interception, while MOV-10 was subsequently supplied to Shreeji Steel. Documents concerning the cancellation of the supplier’s registration were also provided. The company was given a personal hearing opportunity on January 22, 2026, but did not appear; instead, it filed a written reply, which was considered before the final order.

Relying on the Supreme Court’s decision in Assistant Commissioner of State Tax v. Commercial Steel Ltd. , the bench held that none of the exceptional circumstances warranting writ interference were present. “We do not find any breach of fundamental rights, violation of the principles of natural justice, excess of jurisdiction, or challenge to the vires of the statute,” the court noted. Since an alternative remedy under Section 107 of the CGST Act was available, the High Court dismissed the writ petition, leaving Shreeji Steel to pursue its statutory appeal.

Key Takeaways for Tax Practitioners

This judgment underscores the importance of exhausting statutory remedies before invoking the High Court’s writ jurisdiction under Article 226 in GST matters. The court’s clear affirmation of the officer’s authorisation under Rule 138B provides comfort to tax authorities conducting physical verification of conveyances. For taxpayers, the decision serves as a reminder that procedural challenges must be based on concrete violations; mere allegations of lack of authorisation will not succeed if the officer can demonstrate proper delegation.

The ruling also highlights the limited scope of judicial review when an alternative remedy exists. Unless a case involves a breach of fundamental rights, violation of natural justice, excess of jurisdiction, or a challenge to the vires of the statute, the High Court will not entertain a writ petition against adjudication orders under the GST regime. The judgment is expected to streamline enforcement actions and reduce unnecessary litigation at the writ stage.

As the GST framework continues to evolve, this decision reinforces the balance between effective tax administration and the right of taxpayers to due process. Shreeji Steel now has the option to file an appeal under Section 107, where all factual and legal contentions can be addressed on merits.