The Highway Hold-Up: A Tale of Trapped Cargo, Tax Traps & The Court that Cleared the Road

Jurisdictional Limits Under the IGST Framework: The Incompetence of Intermediary States to Confiscate Interstate Transit Goods Under Sections 129 & 130

For Indian businesses, the Highway isn't just asphalt-it's an artery. Every minute a truck sits idle, profits bleed.

Picture this: you're a spice trader. Your convoy leaves the lush hills of Kerala, packed with perishable gold, bound for the bustling mandis of Delhi. Your e-way bills are impeccable. Your GST invoices are immaculate. You are playing entirely by the rules.

But as your trucks cross into Andhra Pradesh-a state that is merely a spot on the map for this journey-the barricades drop. A State Tax Officer pulls the driver over, squints at the paperwork, and arbitrarily decides your spices are “undervalued or mismatched quantity or description.” In the blink of an eye, an ordinary journey spirals into a nightmare.

Detention notices are printed. Confiscation is threatened.While the paperwork sits on a desk, your cargo is baking in the sun, your working capital is paralyzed on the side of a highway, and your furious buyers are threatening to cancel.

This isn't a hypothetical supply chain stress-test. This was the gruelling, expensive reality for merchants like Golden Traders and M/s FM Trading. But they didn't just take the hit-they fought back. And their battle culminated in a landmark Andhra Pradesh High Court ruling at Amaravati (W.P. No. 541 of 2026) {2026 (4) TMI 288}delivered on 1st April 2026 that has somewhere dismantled these highway tax traps in the country.

1. The Case at a Glance: The Checkpost Interceptions

In a series of cases brought before the High Court, APGST officers at various state check posts intercepted consignments moving in the course of interstate trade from a point of origin outside Andhra Pradesh to a destination also outside the state.

Except in one instance, it was an admitted fact that the consignments were accompanied by all the necessary documents mandated by Section 68 of the GST Act, 2017. Despite this, the AP State authorities-initiated proceedings under Section 129 (detention and seizure) and continued under Section 130 (confiscation) of the GST Act.Their reasoning? The officers alleged that the goods were either grossly undervalued, mismatched the descriptions, or exceeded the stated quantities.

2. The Core Issues at Stake

Jurisdiction of Intermediary States: Do officers appointed under the APGST Act have the jurisdiction to initiate proceedings under Section 129 or 130 for the movement of goods governed by the IGST Act, especially when the state is merely a transit route?

Valuation as a Ground for Detention: Can alleged undervaluation or document mismatch be taken up as valid grounds for detaining a vehicle or confiscating goods under Sections 129 or 130 of the GST Act?

3. The Core Conflict: Assessing Jurisdiction, Cross-Empowerment, and the Limits of State Power

The legal battle hinged on the interpretation of “cross-empowerment” under Section 6 of the CGST/APGST Acts and Section 4 of the IGST Act with reference to Section 2(91) of APGST Act.

The judgment establishes a crucial linkage between Section 2(91) and Section 6 of the GST Act, effectively defining the scope and limitations of a “proper officer's” authority, particularly in the context of cross-empowerment. Section 2(91) of the APGST Act defines a “proper officer” as an officer assigned specific functions by the Chief Commissioner. However, the court clarified that this assignment only grants jurisdiction within the parameters of the APGST Actitself. It does not inherently bestow powers under the CGST or IGST Acts. To act under these central statutes, state officers rely on the provisions of “cross-empowerment” found in Section 6 of the CGST Act and Section 4 of the IGST Act. The judgment emphasizes that this cross-empowerment is not automatic or boundless.

Under the GST scheme, taxpayers face simultaneous liability under State (e.g., APGST), Central (CGST), and Integrated (IGST) Acts for the same supply. Initially, this led to separate tax collection by State and Central officers, creating a risk of conflicting orders and doubling the compliance burden on taxpayers regarding documentation and filing.

To resolve these issues, the GST Council established guidelines in 2017 (Circular No. 01/2017) to administratively allot taxpayers to either the Central or State authorities. If a taxpayer is allotted to a State like Andhra Pradesh, Section 6 of the CGST Act cross-empowers the State's assigned “proper officer” to also act as the single “proper officer” for CGST and IGST matters for that taxpayer.

However, the Court noted that this interpretation does not cause State authorities to lose their standard jurisdiction under the APGST Act regarding taxpayers allotted to the Centre's administrative control. Sections 6(2) and 6(3) clarify the mandatory procedures for cross-intimidation between jurisdictional officers to maintain judicial comity and prevent parallel proceedings.

This cross empowerment is subject to conditions and is primarily intended to streamline tax administration for allotted taxpayers as per and prevent parallel proceedings, rather than granting state officers unrestricted authority over all interstate transactions.

• The Purpose of Cross-Empowerment (Relying on Armour Security, 2025 (8) TMI 991 - Supreme Court): To further rebut the State's claim, the Court cited the Supreme Court decision in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate & Anr. The Supreme Court clarified that the legislative intent behind cross-empowerment is to protect taxpayers from the hardship of multiple jurisdictions and parallel proceedings by different authorities for the same subject matter. The Hon'ble Supreme Court interpreted the scope of Section 6(2)(a) of the CGST Act within the context of the GST cross-empowerment regime. The Court held that this provision is both enabling and mandatory, requiring a proper officer issuing an order under the CGST Act to also issue a corresponding order under the SGST or UTGST Act to intimate the relevant jurisdictional State or Union Territory officer.

It serves a twofold purpose: protecting taxpayers from parallel proceedings by different authorities on the same subject matter and enabling officers to render comprehensive orders to avoid multiplicity of proceedings. Drawing on the principle of comity between jurisdictions, the Court noted that coordinate authorities must respect each other's domains to preclude conflicting determinations. Furthermore, the term “order” must be broadly construed to encompass all forms of orders an officer is competent to issue, ensuring uniformity of adjudication and acting as a safeguard against prejudice from overlapping actions by different wings of the Department.

• The True Limits of Cross-Empowerment (Relying on TVL Vardhan Infrastructure2024 (3) TMI 1216 - MADRAS HIGH COURT): The AP High Court defined the limits of cross-empowerment, drawing heavily on the Madras High Court's ruling in TVL Vardhan Infrastructure v. Special Secretary. In TVL Vardhan, the Madras HC emphasized that general cross-empowerment requires specific notifications upon GST Council recommendations, which have not been issued except for refunds. Under the administrative allocation mechanism (Circular No. 01/2017), taxpayers are allotted to either Central or State authorities. If allotted to one, the counterpart has no jurisdiction to interfere or usurp powers of investigation or adjudication, rendering such proceedings without jurisdiction. Adopting these principles, the AP High Court held that an officer appointed under the APGST Act is not automatically cross-empowered to act under CGST or IGST Acts. Jurisdictional competence only exists if the specific taxpayer against whom action is proposed has been administratively allotted to the State of AndhraPradesh and that officer is the appointed proper officer for that taxpayer. This principle applies vice versa to Central officers.

4. Linking cross empowerment to Section 129 & 130:

Under Sections 129 and 130 of the GST Act, the authority to detain, seize, or confiscate goods and conveyances in transit is vested in the “proper officer,” assigned by the Commissioner. Due to the nature of transit checks, these officers hold general jurisdiction over all vehicles within their assigned area and are not restricted to specific taxpayers. Since Sections 129 and 130 are complementary and intertwined, functions under both are typically assigned together. Consequently, statutory cross-empowerment under Section 6 of the CGST Act is sufficient for a State proper officer under the APGST Act to discharge functions under Sections 129 and 130 for CGST purposes. However, the Court noted that different factors apply regarding the IGST Act and inter-state supplies.

5. In the light of Constitutional Provisions:

For interstate supply, this cross empowerment directly conflicts with the Constitutional provisions. While Article 246A allows states to tax intra-state supplies, Articles 246A(2) and 269A read with Article 286 strictly reserve the power to levy and collect taxes on inter-state trade exclusively to Parliament.

6.The “No Claim” Rule for Intermediary States:

The Court highlighted that under Section 17 of the IGST Act, taxes on interstate trade are apportioned only between the Centre, the origin state, and the destination state. An intermediary state (like Andhra Pradesh in a Kerala-to-Delhi transit) receives no share of this tax. Therefore, the AP High Court ruled that a transit state cannot use Sections 129 or 130 to intercept goods and unjustly appropriate penalties or fines that do not belong to them. While authorities rightfully collect penalties for evasion on intra-state sales to recover dues belonging to that specific State and the Union, the Court noted that in the case of IGST, no taxes are due to intermediary transit states.

Illustration : (State A to State C via State B), the Court explained that if a transit state (B) utilizes Section 129 or 130 to confiscate goods and collect fines, it is appropriating revenue from a transaction that is not taxable within its jurisdiction. Furthermore, since there is no provision in the GST Acts to reimburse these collected penalties to the rightfully owed origin or destination states (A or C). The Court held that Sections 129 and 130 cannot be used to vindicate such unjust appropriation by an intermediary state.

7. The Conclusion: Clearing the Highways

With a definitive stroke, the Andhra Pradesh High Court disposed of the writ petitions, setting aside the detention and confiscation proceedings. The Court laid down the practical protocol for the future:

1. No Transit Jurisdiction: AP State officers (Transit state officers) cannot discharge functions under the IGST Act for interstate sales that originate and culminate outside the State.
2. Forward, Do Not Seize: If a State officer spots discrepancies in an IGST movement passing through, they are legally barred from seizing the goods. Their only valid recourse is to forward the observed discrepancies to the proper jurisdictional officers of the consignor and the consignee to take appropriate action.
3. Presumptions and Protocols: If a consignment is intercepted without the required waybills, the State officer is legally permitted to operate under the rebuttable presumption that the movement constitutes an intra-state supply. This shift in status grants the local officer the authority to initiate proceedings under the State's specific GST provisions. However, this is not an absolute power; the burden of proof then shifts to the taxpayer, who retains the right to provide evidence-such as origin-destination proofs or valid tax invoices-to rebut this presumption and demonstrate the inter-state nature of the transit.

8. Valuation is Not Assessment: Rejecting Highway Tax Traps

Addressing the second issue, the High Court firmly rejected the practice of highway officers acting as mobile assessing authorities. A proper officer conducting a routine transit check cannot venture into complex valuation disputes except in exceptional circumstances. To support this, the Court cited a unified front of rulings from across the country:

• Alfa Group v. Assistant State Tax Officer (Kerala High Court) {2019 (11) TMI 943 - KERALA HIGH COURT}: Established that there is no provision under the GST Act mandating goods cannot be sold below MRP. Arbitrary detention on these grounds erodes public confidence in tax administration.
• K.P. Sugandh Ltd. v. State of Chhattisgarh (Chhattisgarh High Court) {2020 (3) TMI 890 - CHHATTISGARH HIGH COURT}: Reaffirmed that undervaluation of a good in an invoice cannot be a legal ground for the detention of goods and vehicles under Section 129.
• Panchi Traders v. State of Gujarat (Gujarat High Court){2025 (12) TMI 941 - GUJARAT HIGH COURT}: Clarified that proper officers cannot venture into the assessment and valuation of goods at the time of interception. Confiscation can only be resorted to in cases of blatant, highest-degree violations (like absence of documents or absence of details of dealers or forged e way bills, complete deceptive/divergence/mismatch of goods or fake registrations) that establish a clear intent to evade tax.

This landmark ruling serves as a vital shield for businesses operating in India. It held that “cross-empowerment is not a free buffet.” In India's GST system, state officers are “cross-empowered” to act on behalf of the Centre. However, courts have repeatedly reminded tax departments that this cross-empowerment has strict boundaries. By firmly establishing the jurisdictional limits of intermediary states and preventing highway officers from acting as arbitrary tax assessors, the High Court has ensured that the “One Nation, One Tax” framework functions as intended-keeping the wheels of interstate commerce turning freely.