Transit State Cannot Detain Goods Moving Between Two Other States in IGST Movement: AP HC [Read Order]

In a recent ruling, the Andhra Pradesh High Court held that a transit State cannot detain goods moving between two other States in Integrated Goods and Services Tax (IGST) movement as such transactions have no nexus with the transit State and fall outside its jurisdiction under the GST framework.

The petitioners, including Golden Traders and others, were transporting goods in the course of inter-State trade, where both the origin and destination were outside the State of Andhra Pradesh. While the goods were passing through Andhra Pradesh, the State tax authorities intercepted the consignments at various check posts and initiated proceedings under Sections 129 and 130 of the GST Act, leading to detention and confiscation of goods and conveyances.

The petitioners approached the High Court challenging these actions and sought release of goods and vehicles, arguing that the State authorities had acted without jurisdiction.

The petitioners’ counsel argued that the goods were moving under the IGST framework and had no connection with Andhra Pradesh, as neither the origin nor destination was within the State. It was argued that the State authorities cannot exercise powers under Sections 129 and 130 in such cases, and any discrepancies, if found, could only be examined by the proper officer having jurisdiction over the consignor or consignee.

The State authorities argued that officers under the APGST Act are empowered as “proper officers” and can intercept and take action against goods in transit, including those moving in inter-State transactions.

The Division Bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar observed that under the GST scheme, IGST applies to inter-State supplies and the tax is apportioned between the originating and destination States, not the transit State. The court observed that permitting such action would mean that “amounts rightfully due to State A or State C are being appropriated, by State B,” which is not permissible under the GST framework.

The court explained that powers under Sections 129 and 130 can be exercised only by a proper officer having jurisdiction and pointed out that in cases of inter-State movement with no nexus to the transit State, “the state officer would have to permit the vehicle to continue its journey.”

The court further explained that if any discrepancies are found, it would be open to the State officer to forward them to the appropriate jurisdictional authorities for further action. The court held that the proceedings initiated by the State authorities were without jurisdiction and not sustainable in law.

The court accordingly set aside the proceedings initiated under Sections 129 and 130 against the petitioners and directed release of the goods while permitting the authorities to forward any discrepancies to the appropriate jurisdictional officers for further action.