Revenue Cannot Shift Stand After Physical Verification Clears Goods: Allahabad High Court Quashes GST Demand on Transit Goods

“Authorities Cannot Take a Somersault Once MOV-04 Finds No Discrepancy in Transit Goods”— In a landmark decision reaffirming the sanctity of GST transit inspection procedures, the Allahabad High Court quashed the penalty and demand order issued against M/s Maa Kamakhya Trader, ruling that the Revenue authorities cannot change their stand once a MOV-04 physical verification report has found no discrepancy. The judgment was delivered by Justice Piyush Agrawal in Writ Tax No. 1386 of 2023.

The Court emphasized: “Once on the verification report i.e. MOV-04, the items are fed by the officer concerned, after due verification, the authorities cannot be permitted to completely change its stand or further permitted to supplement by different reasons or grounds, which were not taken or mentioned while preparing the physical verification report in MOV-04.”

The goods belonging to M/s Maa Kamakhya Trader were in lawful transit from Guwahati to Delhi and were intercepted on 21 September 2023 in Amroha district, Uttar Pradesh. At the time of interception, all required documents, including tax invoices, e-invoices, e-way bills, and Bilties (GR) were produced and the statement of the driver was recorded in MOV-01.

Crucially, the MOV-04 physical verification report recorded no discrepancies between the goods described in the documents and those actually found in the vehicle. Despite this, authorities later alleged a mismatch and imposed a demand, which was upheld on appeal by the Additional Commissioner.

The central question before the Court was whether the Revenue could raise a demand based on grounds not found or recorded at the time of MOV-04 verification.

The Court answered in the negative: “The purpose of filling MOV-04, at the time of physical verification, is to find the correctness of the goods in transit from the accompanying documents… If the officer did not find any change or difference in goods that of mentioned in the accompanying documents, the same cannot be permitted at a later stage for taking a different stand.”

Justice Agrawal rejected the Revenue’s argument that errors in MOV-04 were due to auto-filling via HSN codes, finding it factually incorrect. It was admitted that fields were filled manually, making any discrepancy the result of deliberate choice or oversight—not software limitations.

The Court reiterated the settled law from Jitendra Kumar v. State of U.P. (Writ Tax No. 1425 of 2023): “Once the Revenue had taken a particular stand, the same cannot be completely changed and/or supplemented by a different reason or ground… This volte face cannot be countenanced by this Court.”

The Court condemned the later issuance of penalty merely on changed grounds post-verification:
“The detention of goods causes serious prejudice to an assessee and the same can only be done on the basis of specific, valid and reasonable grounds.”

Allowing the writ petition, the Court quashed the impugned penalty and demand order, directing the Revenue to refund any deposited amount within three weeks of submission of a certified copy of the judgment.

The ruling reinforces that Revenue actions must be consistent and anchored in official verification records—MOV-04 cannot be bypassed or contradicted at a later stage merely to justify a penalty.

Date of Decision: 28 April 2025