In a significant judgment, the Allahabad High Court has ruled that GST authorities in Uttar Pradesh cannot impose penalties on goods that are merely passing through the state when both the origin and destination lie outside its jurisdiction.
The court set aside penalty orders issued against five petitioners, declaring them illegal and directing the immediate release of the seized goods and vehicles.
Court’s Key Observations
A division bench of Justice Saumitra Dayal Singh and Justice Swaroopma Chaturvedi noted that allowing transit states to impose penalties would disrupt the free flow of goods across the country. Such actions, the court said, would violate the constitutional guarantee of free trade under Article 301.
The bench clarified that while GST officials in Uttar Pradesh have the authority to inspect goods in transit, they cannot levy penalties if the goods are neither produced in the state nor intended for supply there.
Case Background
The ruling came while hearing petitions filed by firms including M/s Maruti Enterprises (Gautam Buddh Nagar), M/s Shiv Shankar Enterprises (Kanpur), Praveen Supari Bhandar (Chandauli), and Shiva Enterprises.
The case involved consignments of dry betel nut transported from states such as West Bengal, Assam, and Bihar to destinations including Delhi and Nagpur. GST authorities had imposed penalties ranging between Rs 29 lakh and Rs 40 lakh.
Clarification on Enforcement
The court further stated that any discrepancies, such as missing e-tax invoices, should be reported to authorities in the originating state rather than being handled by transit states through seizure or penalties.
Significance of the Ruling
The judgment is expected to strengthen interstate trade by preventing multiple penalties on the same goods during transit. It also offers relief to transporters and businesses by limiting enforcement powers of transit states and reinforcing the constitutional principle of free movement of trade across India.
Source from: https://knnindia.co.in/news/newsdetails/state/gst-authorities-cannot-penalise-transit-goods-allahabad-hc
