Intermediary State GST Officers Cannot Detain Inter-State Goods Merely Passing Through The State: Andhra Pradesh High Court

"Amounts rightfully due to State A or State C are being appropriated, by State B. It is our view that Section 129 or 130 cannot be pressed to vindicate such appropriation." Andhra Pradesh High Court, in a significant ruling dated April 1, 2026, held that State GST officers lack the jurisdiction to intercept, detain, or confiscate goods moving in inter-state trade if the state is merely a transit route.

A division bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar ruled that intermediary states have no share in the Integrated Goods and Services Tax (IGST) and therefore cannot penalise consignments originating and culminating outside their borders.

State GST officers cannot exercise jurisdiction over inter-state transit consignments unless the taxpayer is administratively allotted to them.

Intermediary states where goods merely pass through have no constitutional right to levy penalties under the IGST Act.

Questions of undervaluation or minor invoice discrepancies cannot be valid grounds for detention or confiscation under Sections 129 or 130 of the GST Act.

The court was hearing a batch of writ petitions filed by various traders whose consignments were intercepted by Andhra Pradesh State GST (APGST) officers. The goods were moving in transit from origin points like Kerala and Karnataka to destinations like Delhi and Maharashtra. The state authorities had initiated proceedings under Sections 129 and 130 of the GST Acts, detaining and confiscating the fully documented goods primarily on allegations of gross undervaluation or quantification discrepancies.

The primary question before the court was whether officers appointed under the APGST Act are empowered to initiate detention and confiscation proceedings under the CGST or IGST Acts for inter-state movement of goods. The court was also called upon to determine whether alleged undervaluation of goods constitutes a valid legal ground for seizing conveyances in transit under Sections 129 and 130 of the GST Acts.

The court first analysed the statutory framework of cross-empowerment under Section 6 of the CGST and APGST Acts, read with Section 4 of the IGST Act. The bench clarified that a State officer does not automatically gain unfettered jurisdiction to act as a "proper officer" under Central Acts for any taxpayer traversing the state. The court noted that cross-empowerment is strictly tied to the administrative allotment of a specific taxpayer to the state by the GST Council, preventing overlapping jurisdictions.

"An officer, appointed under the APGST Act, is not automatically cross empowered to exercise any function, under the CGST Act or the IGST Act, unless the tax payer against whom any action is proposed had been administratively allotted to the State of Andhra Pradesh."

Delving into the constitutional architecture introduced by Articles 246A and 269A, the court emphasised that Parliament holds exclusive power to tax inter-state supply. The bench examined Section 17 of the IGST Act, observing that tax revenue is apportioned only between the Union and the destination state. Consequently, an intermediary state like Andhra Pradesh, through which goods merely transit, holds no financial stake or tax claim over the transaction.

"In the case of IGST, no part of the taxes are due, to any intermediary state, through which the goods are passing. In such a situation, can the intermediary state, under Section 129 or 130, levy and collect penalties or fines?"

The court strongly condemned the practice of intermediary states penalising transit vehicles, noting that it results in the unjust enrichment of the transit state at the cost of the origin or destination state. The bench highlighted that the GST statutory framework contains no mechanism for an intermediary state to reimburse collected penalties to the rightfully entitled states, rendering such detentions legally unsustainable and beyond jurisdictional competence.

"Thus, amounts rightfully due to State A or State C are being appropriated, by State B. It is our view that Section 129 or 130 cannot be pressed to vindicate such appropriation."

Addressing the core reason for the detentions, the bench categorically ruled that alleged undervaluation is not a valid trigger for invoking the draconian powers of seizure and confiscation under Sections 129 and 130. Relying on precedents from the Kerala High Court in Alfa Group, the Chhattisgarh High Court in K.P. Sugandh Ltd., and the Gujarat High Court in Panchi Traders, the bench held that such powers are reserved for blatant statutory contraventions aimed at tax evasion, not mere assessment or valuation disputes during transit.

"We are in respectful agreement with the above views, that questions of seizure or confiscation, would not arise before a proper officer, under Section 129 or 130, even in the normal course, on grounds of variation in valuation etc."

In a specific writ petition where authorities claimed goods were moving without e-way bills based on an alleged unrecorded prior inspection, the court flatly rejected the state's contention. The bench mandated strict adherence to Rule 138C of the CGST Rules, which requires a summary report to be uploaded within 24 hours of an inspection, noting that unrecorded inspections hold no evidentiary value and cannot justify subsequent confiscations. "The first inspection has not been recorded and no report has been placed online... In such circumstances, this Court cannot accept the fact that there was inspection much prior to the actual inspection."

While stripping intermediary state officers of the power to detain transit goods under the IGST framework, the court clarified their permissible scope of action. The bench held that if state check-post officers discover discrepancies in inter-state consignments, their role is strictly limited to gathering information. They must allow the vehicle to proceed and relay their findings to the jurisdictional officers of the origin or destination states for proper assessment. "If any discrepancies are found, it would be open to the state officer to forward the said discrepancies to the proper officer of the consignee as well as the consignor."

The High Court allowed all the writ petitions and set aside the detention and confiscation proceedings initiated against the petitioners under Sections 129 and 130 of the GST Acts. The court granted liberty to the state authorities to forward the intercepted records and drawn samples to the respective jurisdictional proper officers of the petitioners for any further lawful action.

Date of Decision: 01 April 2026