AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (5) TMI 1510
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.... of the penalty orders impugned in the individual petitions, are as under: Serial No. Writ Tax No. Party Name Origin of Goods Destination of Goods Date of Impugned Penalty Order Penalty Imposed (Rupees) 1. 1423 of 2026 M/s Maruti Enterprises West Bengal Delhi 04.02.2026 33,18,525/- 2 2001 of 2026 M/s Praveen Supari Bhander Assam Nagpur 18.03.2026 40,30,299/- 3. 2451 of 2026 M/s Shiv Shanker Enterprises Assam Delhi 08.04.2026 40,38,458/- 4. 2445 of 2026 M/s Shiv Shanker Enterprises Assam Delhi 10.04.2026 40,71,675/- 5. 1573 of 2026 M/s Shiva Enterprises Bhojpur, Bihar New Delhi 22.02.2026 29,01,150/- 4. Facts are similar. Since, additional ground exists in Maruti Enterprises, facts relevant to that case are being noted below. a. The petitioner, M/s Maruti Enterprises, is registered under the Delhi Goods and Services Tax Act, 2017 (hereinafter referred to as "Delhi Act") bearing GSTIN No. 07ACCFM9401F1ZF. The petitioner purchased 30,100 kgs of dried Areca nuts from M/s A.K. Enterprises, a person registered under the West Bengal Goods and Services T....
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.... goods, originating in one State and terminating in another State, excluding the State of Uttar Pradesh, for the only reason that such goods are passing through, using the State of Uttar Pradesh as a transit State. (ii) Whether provisions of sections 6, 68, 69, 129 of the State Act and Central Act read with Section 4 and 20(3) of the IGST Act, read with Rule 138A, 138B and 138C of the Central Rules confer jurisdiction on the GST authorities of the State of Uttar Pradesh to detain goods and impose penalties, above noted, on any anomaly in the transaction noted, though such goods are only transiting through the State of Uttar Pradesh. 6. Learned counsel for the petitioners would submit, freedom of inter-state trade is constitutionally protected under Article 301 of the Constitution of India. In the garb of power to impose reasonable restrictions, the Parliament and the State legislature may not have and at present, they have not enacted any provision of law, as may allow the authorities of the State of Uttar Pradesh, any jurisdiction to detain or confiscate such goods and/or penalise the traders who may have sold or purchased goods outside the State and who may in pursuan....
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....evasion of tax, fall within legislative competence of the States. Such measures may stand protected, by way of reasonable restrictions. 12. On facts, it has been stressed that the seller M/s A.K. Enterprises is a non-genuine dealer. It has disclosed purchase of Areca Nuts from persons whose registrations have either been cancelled, or suspended. Second, the goods were not loaded on the vehicle in issue, from the registered place of business of the supplier M/s A.K. Enterprises. Rather, they were loaded from another place described as Falakata. They were to be delivered at New Delhi on further telephonic instructions to be received by the driver/person in-charge of the vehicle in question. At the end of the recipient, the registration of the petitioner has been suspended, although during pendency of this writ petition. Therefore, the action taken by the State authorities is described to be wholly valid. 13. Having heard learned counsel for the parties and having perused the record, at the outset, we may clarify that we do not intend to test the constitutional validity of any of the provisions of any statutory law. For the purpose of the instant case and the two issues framed a....
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....ny goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,- [(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty; (b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;] (c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may....
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....for manufacture of alcoholic liquor, for human consumption], on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person: PROVIDED that the integrated tax on goods [other than the goods as may be notified by the Government on the recommendations of the Council] imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962)." (emphasis supplied) 19. Further, inter-state supply has been described under Section 7 of the IGST Act. Section 7(1) of the said Act reads as below:- "7. Inter-State supply (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are-in- (a) two different States; (b) t....
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.... supply shall be the location at which such goods are taken on board. (2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed." (emphasis supplied) 21. Then, by way of prescriptions made, to give effect to the above noted provisions of the principal legislation, Rules 138A, 138B and 138C of the Rules framed under the State Act and the Central Act, read as below:- "138A. Documents and devices to be carried by a person in-charge of a conveyance (1) The person in-charge of a conveyance shall carry- (a) the invoice or bill of supply or delivery challan, as the case may be; and (b) a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner. (2) A registered person may obtain an Invoice Reference Number from the common portal by uploading, on the said portal, a tax invoice issued by him in FORM GST INV-1 and produce the same for verification by the proper officer in lieu of the tax invoice and such ....
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....EWB-03 shall be recorded within three days of such inspection. (2) Where the physical verification of goods being transported on any conveyance has been done during transit at one place within the State or in any other State, no further physical (2) Where the physical verification of goods being transported on any conveyance has been verification of the said conveyance shall be carried out again in the State, unless a specific information relating to evasion of tax is made available subsequently." 22. While Rule 138 provides for issuance of e-Way Bill for which there is no dispute between the parties, Rule 48(4) of the Central Rules and the State Rules, imposes another condition for issuance of e-Tax Invoice by such suppliers whose aggregate turnover for the preceding financial year exceeds Rs. 5 crores. At present, the revenue contends that the aggregate turnover of M/s A.K. Enterprises for the previous tax period exceeds Rs. 5 crores. Yet no e-Tax Invoice was issued by it. Therefore, the prescribed document was not accompanying the goods that were in transit through the State of Uttar Pradesh. For ready reference Rule 48(4) and 48(5) of the Central Rules, reads as bel....
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....under intimation to the jurisdictional officer of State tax or Union territory tax; (b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject-matter, no proceedings shall be initiated by the proper officer under this Act on the same subject-matter. (3) Any proceedings for rectification, appeal and revision, wherever applicable, of any order passed by an officer appointed under this Act shall not lie before an officer appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act." (emphasis supplied) 25. Also, Section 4 of the IGST Act reads as below:- "4. Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such exceptions and conditions as the Government shall, on the recommendations of the Counci....
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....mapped to the Central GST authorities, in the State of West Bengal, that fact may itself not deprive the State GST authorities of the State of West Bengal, to proceed against M/s A.K. Enterprises with respect to a transaction in issue. Similarly, if the petitioner no. 1 is mapped to the State GST authorities in the State of Delhi, that may not itself deprive the Central GST authorities in the State of Delhi, from proceeding against the petitioners. To that extent, and for that purpose, the statutory provision of cross-empowerment exists. 29. In the scheme of the GST laws, though harmony and synergy has been created in the legislative provisions, to provide for a homogeneous tax regime by allowing for pari materia legislations to arise, in all States, as are consistent to the Central Act, the cross-empowerment provision has been incorporated to cross-empower the authorities of the Union and the GST authorities of individual States - with respect to taxable transactions performed in such States. However, no cross-empowerment has been attempted or created under the GST laws between State GST authorities of all States. 30. The cross-empowerment is between the authorities of the U....
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....suspicions or doubts would have stood erased. However, for reason of absence of e-Tax Invoice, the State GST authority may not be faulted for having checked (on the Common Portal), the status of M/s AK Enterprise. Having discovered that the said registered person may have achieved turnover in excess of Rs.5 crores in the previous financial year, deficiency of e-Tax Invoice may have been rightly noted. Upto that point, we find no fault with the State GST authorities. 34. The fault lies in the consequential action taken. To the extent, it never came to be alleged either that goods different from the goods described in the Tax Invoice and the e-Way Bill were being transported by the petitioner, or that the goods being transported, were meant for supply inside the State of U.P., no levy of IGST or State GST or Central GST, would ever arise inside the State of U.P. It is also not the case that the Tax Invoice produced by the petitioner is a bogus document. True as it is, that the prescribed document may have been the e-Tax Invoice. However, that issue may be conclusively dealt with and decided not by the State GST authorities functioning inside the State of Uttar Pradesh but by the c....
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....quirement of Section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the State Government on the basis of the return. That is the requirement of Section 7(2). Section 7(2-A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return. When Section 11-B(a) uses the expression "tax payable under sub-sections (2) and (2-A) of Section 7", that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due ex hypothesi on the turnover and taxable turnover "shown in or based on the return". The word 'payable' is a descriptive word, which ordinarily means "that which must be paid or is due, or may be paid" but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should ....
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....to turnover. That fact is in the special knowledge of the supplier. The purchase/recipient may neither have the means, nor he may be burdened to enquire about the same, before transacting a purchase. That may be a wholly unreasonable burden cast on the recipient/purchaser. To the extent the physical Tax Invoice is not bogus and its issuance is not doubted, the recipient/purchaser may not be penalised, for no fault. 38. In the decisions of Supreme Court in M/s Armour Security (supra), following issues arose before the Supreme Court : "I. Whether issuance of summons can be regarded as "initiation of proceedings" within the meaning of Section 6(2)(b) of the CGST Act." 39. Approving the co-ordinate bench decision of this Court, in G.K. Trading v. Union of India & Ors. 2020 SCC OnLine All 1907, the Supreme Court discussed the issue of cross-empowerment under section 6 of the CGST laws, as below : "b. Framework of single interface and cross-empowerment of powers under Section 6 of the CGST Act 34. The unique scheme and framework of the Goods and Services Tax regime envisages two distinct concepts at its heart, the concept of a "single interface" as-well a....
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....icers for the purposes of the respective State enactments. The provision reads thus: "6. Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances.--(1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. (2) Subject to the conditions specified in the notification issued under sub-section (1),-- (a) where any proper officer issues an order under this Act, he shall also issue an order under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as authorised by the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, under intimation to the jurisdictional officer of State tax or Union territory tax; (b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has in....
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.... 110066 Sir, Subject: Reference form DGGI on cross-empowerment under GST. reg. I am directed to refer to DGGI letter F.No.574/CE/66/2020/Inv./15308 dated 26.05.2020 on the issues related to cross-empowerment of officers in terms of provisions of section 6 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "the CGST Act"). 2. Issue raised in the reference is whether intelligence based enforcement actions initiated by the Central Tax officers against those taxpayers which are assigned to the State Tax administration gets covered under section 6(1) of the CGST Act and the corresponding provisions of the SGST/UTGST Acts or whether a specific notification is required to be issued for cross-empowerment on the same lines as notification No. 39/2017-CT dated 13.10.2017 authorizing the State Officers for the purpose or refunds under section 54 and 55 of the CGST Act. 3.1 The issue has been examined in the light of relevant legal provisions under the CGST Act, 2017. It is observed that Section 6 of the CGST Act provides for cross-empowerment of State Tax officers and Central Tax officers and reads as:- "6. (1) Without prej....
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....f evasion of taxes. For this purpose, both the Central and State tax administrations have been armed with the power to initiate intelligence-based enforcement action i.e., an action that is predicated on information of tax evasion emanating from the value chain or chain of transactions rather than from any administrative scrutiny by way of audit of accounts or returns. 48. Such gathering of intelligence is intended to be a non-intrusive exercise. The Department relies on data analytics, validation with third-party data, and other methods to collect actionable intelligence via analytical tools, human intelligence, modus operandi alerts as well as information through past detections. Taxpayers must be mindful that intelligence about evasion of tax cannot be procured from them through issuance summons or other non-descript letters and correspondence. 49. Any action arising from the audit of accounts or detailed scrutiny of returns falls within the first category, and proceedings in such cases are to be initiated by the tax administration to which the taxpayer is assigned. In contrast, when proceedings are based on intelligence relating to tax evasion, they can be ini....
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.... Court has taken a view similar to ours. Paragraph 28, 29, 36 and 37 read as below : "28. The purpose of Section 129 and 130, is to ensure compliance of the provisions of the GST Acts and for checking evasion of tax. In the normal course, evasion of tax, on intra state sales, would result in non payment of taxes, which are rightfully due to that State and the Union. Thus, the State or Central authority, assigned the functions of a "proper officer", would be recovering the penalty and other sums demanded, under these provisions, as the rightful dues of that State and the Union. In the case of IGST, no part of the taxes are due, to any intermediary state, through which the goods are passing. In such a situation, can the intermediary state, under Section 129 or 130, levy and collect penalties or fines? 29. An illustration is necessary, to understand this situation. There is an inter-state supply of goods, commencing from State A to State C. These goods have to move through State B, to reach State C from State A. The State officer, of State B, exercising powers under Section 129 or 130, seizes and subsequently confiscates the goods moving through State B and auctions ....
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....hen the State of Andhra Pradesh is entitled to an allocation of a share of the tax, under section 17 of the IGST Act, in relation to such transaction. D. A "proper officer' appointed under the APGST Act, and assigned the functions, under section 129 and/or 130, of the APGST Act, can not discharge such functions, under the IGST Act, in relation to inter state sales, which originate outside the State and culminate outside the State. E. In the event of any discrepancies found, in any movement of goods, under the IGST Act, it would be open to the State officer, to forward the said discrepancies to the proper officer of the consignee and the proper officer of the consignor, to take further action." (emphasis supplied) 44. To the extent, the transaction for supply of goods originates and is to terminate outside the State of U.P., involving zero tax incidence in the State of U.P., discrepancies noticed and doubts expressed - of e-Tax Invoice not issued; purchases made from unregistered persons (by the supplier), subsequent suspension of registration of the petitioner etc., are extraneous to the core issue. 45. Consequentially, we answer the two issued framed....