Inter-State transit seizure under State GST was prima facie unsustainable before the e-way bill rule became operative.

Inter-State transit goods were treated as governed by the Integrated Goods and Services Tax Act, with the Central GST framework applicable for inspection and seizure matters. The seizure under the U.P. Goods and Services Tax Act was found prima facie unsustainable because the e-way bill mechanism under Rule 138 of the Central Goods and Services Tax Rules had not yet become operative on the relevant date. Interim relief was therefore granted by directing release of the goods and vehicle on furnishing an indemnity bond and other security, while leaving the merits open for further hearing.

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Issues: Whether the seizure of goods in transit from outside the State could be sustained under the U.P. Goods and Services Tax Act, 2017, and whether absence of an operative e-way bill requirement under the Central Goods and Services Tax regime on the relevant date rendered the seizure prima facie illegal, warranting interim release of the goods and vehicle.

Analysis: The goods were in transit from outside the State, so the transaction was treated as an inter-State supply governed by the Integrated Goods and Services Tax Act, 2017, with the Central Goods and Services Tax framework made applicable through Section 20 of the Integrated Goods and Services Tax Act, 2017 for matters of inspection, search and seizure. The order of seizure had been passed under Section 129(1) of the U.P. Goods and Services Tax Act, 2017, but the Court noted that the U.P. regime applies to intra-State transactions and that the e-way bill mechanism under Rule 138 of the Central Goods and Services Tax Rules, 2017 was enforced only from 1 February 2018. On the relevant date, therefore, the Court found that the seizure appeared prima facie illegal, while leaving the merits open for counter-affidavit and further hearing.

Conclusion: Interim relief was granted in favour of the petitioner by directing release of the goods and vehicle on furnishing an indemnity bond and security other than cash or bank guarantee.

Final Conclusion: The writ petition was not finally decided on merits, but the petitioner obtained interim protection against continued detention of the goods and vehicle.

Ratio Decidendi: In inter-State transit, where the applicable e-way bill requirement under the Central goods and services tax framework had not yet become operative, seizure of goods under the State goods and services tax machinery was not sustainable even prima facie, and interim release could be ordered on appropriate security.

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