GST Bar on Auction Sales Beyond Customs Jurisdiction: Madras HC Quashes Public Notice, Affirms GST Liability [Read Order]

In a recent ruling, the Madras High Court quashed a Public Notice issued by the Customs Department that prohibited custodians from collecting GST on auctioned goods, holding that the Customs authority had acted beyond its jurisdiction and that GST liability on auction sales is governed solely by the CGST Act.

The case arose from a writ petition filed by the National Association of Container Freight Stations (NACFS) and German Express Shipping Agency, challenging a Public Notice issued by the Joint Commissioner of Customs.

The notice directed custodians of uncleared cargo not to collect GST on auction sales conducted under Section 48 of the Customs Act, 1962. The petitioners contended that this directive was ultra vires and interfered with their statutory obligations under the CGST Act.

The petitioners argued that auction sales of uncleared cargo are taxable supplies under the CGST Act and that custodians are liable to collect and remit GST on such transactions.

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They submitted that the Customs Department had no jurisdiction to issue directions regarding GST collection, and that the Public Notice created confusion and legal risk for custodians acting in compliance with GST law.

The Court examined the statutory framework and agreed with the petitioners. It held that the Customs Department’s authority under the Customs Act does not extend to regulating GST collection, which falls exclusively within the domain of the GST authorities.

The Court emphasised that the CGST Act is a self-contained code governing the levy, collection, and administration of GST, and that any interference by Customs in this domain is legally unsustainable.

It was observed that it was not open to the Customs Department to issue directions that effectively nullify or override the statutory obligations imposed by the CGST Act.

The Court also considered the practical implications of the Public Notice. It noted that custodians such as Container Freight Stations (CFSs) are registered under the GST regime and are obligated to collect and remit GST on taxable supplies, including auction sales of uncleared cargo.

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The impugned notice, by prohibiting GST collection, placed custodians in a legal quandary, exposing them to penalties under GST law for non-compliance, while simultaneously facing departmental pressure from Customs.

In its ruling, the bench of Justice N Anand Venkatesh reaffirmed that auction sales of uncleared cargo constitute taxable supplies under the CGST Act and that the liability to collect GST rests with the custodian conducting the auction.

It held that the Customs Department’s attempt to regulate GST collection through a Public Notice was ultra vires and legally unsustainable.

Accordingly, the Madras High Court quashed the Public Notice and clarified that GST liability on auction sales remains governed exclusively by the CGST Act.

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