Inter-State transit seizure under GST was tested under the central framework, and absence of operative e-way bill support made detention unsustainable.

Inter-State transit consignments were examined under the Integrated Goods and Services Tax and corresponding Central Goods and Services Tax framework rather than the U.P. Goods and Services Tax regime. The Court treated the seizure as prima facie governed by the inter-State tax provisions because the goods were moving from outside the State, and Section 20 of the Integrated Goods and Services Tax Act attracts Central Goods and Services Tax procedures for inspection, search and seizure. It further noted that the Central e-way bill system became effective only later, so the absence of an operative e-way bill requirement on the relevant date rendered the detention prima facie unsustainable and justified release of the goods and vehicle on indemnity and security.

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Issues: (i) Whether the seizure of goods in transit from outside the State was governed by the Integrated Goods and Services Tax regime and the Central Goods and Services Tax provisions rather than the U.P. Goods and Services Tax provisions; (ii) Whether, on the relevant date, absence of an operative e-way bill requirement under the Central Goods and Services Tax framework made the seizure prima facie illegal and justified release of the goods and vehicle.

Issue (i): Whether the seizure of goods in transit from outside the State was governed by the Integrated Goods and Services Tax regime and the Central Goods and Services Tax provisions rather than the U.P. Goods and Services Tax provisions.

Analysis: The goods were stated to be in transit from outside the State. The legal framework distinguished intra-State supplies under the U.P. Goods and Services Tax Act from inter-State transactions governed by the Integrated Goods and Services Tax Act. Section 20 of the Integrated Goods and Services Tax Act makes the Central Goods and Services Tax provisions applicable to inspection, search and seizure matters under that Act. On that basis, the seizure order was examined as one falling within the inter-State tax regime rather than the State levy.

Conclusion: The seizure was treated, prima facie, as governed by the Integrated Goods and Services Tax and Central Goods and Services Tax framework, not by the U.P. Goods and Services Tax framework.

Issue (ii): Whether, on the relevant date, absence of an operative e-way bill requirement under the Central Goods and Services Tax framework made the seizure prima facie illegal and justified release of the goods and vehicle.

Analysis: Rule 138 of the Central Goods and Services Tax Rules permits prescription of documents to accompany consignments until the e-way bill system is operationalised. The Court noted that the Central Goods and Services Tax e-way bill notification became effective only from 1 February 2018, whereas the relevant transaction was earlier. The State rule and notification were viewed as applicable only to movements within Uttar Pradesh. In that background, the seizure was found to be prima facie unsustainable for want of an operative e-way bill requirement under the applicable Central regime.

Conclusion: The seizure was found prima facie illegal, and the goods together with the vehicle were directed to be released on furnishing of an indemnity bond and security other than cash or bank guarantee.

Final Conclusion: The petition obtained interim relief on the basis that the inter-State transit was to be tested under the integrated tax framework and, in the absence of an operative central e-way bill requirement on the relevant date, the seizure could not be sustained at that stage.

Ratio Decidendi: For inter-State transit consignments, seizure and related detention must be tested under the Integrated Goods and Services Tax and corresponding Central Goods and Services Tax framework, and where the operative e-way bill requirement had not yet come into force on the relevant date, detention is prima facie unsustainable.

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