Facts of the Case:

In this case, the petitioner, registered under the Delhi GST law, had purchased goods from a supplier registered in West Bengal. The goods were transported under a valid tax invoice and e-way bill from Falakata (West Bengal) to New Delhi through Uttar Pradesh. While the goods were passing in Uttar Pradesh, they were intercepted by the State GST authorities. Upon verification, the authorities noticed that the supplier had not issued an e-tax invoice/e-invoice as allegedly required under Rule 48(4) of the CGST Rules, since the supplier’s turnover exceeded the prescribed threshold.

Upon verification, the authorities found that the supplier had not issued an e-tax invoice/e-invoice as allegedly mandated under Rule 48(4) of the CGST Rules. The authorities further noted that the supplier had procured goods from dealers whose registrations were suspended or cancelled and that the purchaser was allegedly not registered for dealing in areca nuts. Based on these allegations, the goods were detained and substantial penalties were imposed under Section 129.

The petitioners challenged the detention and penalty proceedings contending that Uttar Pradesh, being merely a transit State, lacked jurisdiction to impose penalties in respect of inter-State transactions originating and terminating outside the State.

Issue: 

Whether GST authorities of Uttar Pradesh have jurisdiction to detain goods and impose penalties in relation to inter-State transactions where the goods merely transit through Uttar Pradesh and neither originate nor terminate there. Whether Sections 6, 68 and 129 of the CGST/SGST Acts read with Sections 4 and 20 of the IGST Act and Rules 138A to 138C confer jurisdiction upon transit-State authorities to initiate penal proceedings for discrepancies noticed during transit. Whether absence of an e-tax invoice/e-invoice justified detention and imposition of penalty by the transit-State authorities.

Held That: 

The Court held that GST authorities of a transit State are empowered under Sections 68 and 129 read with Rules 138A to 138C to intercept, inspect and verify goods in transit as a regulatory measure. However, such powers are limited to verification and do not authorise detention or penal action where no tax incidence arises in the transit State.

The Court observed that the goods admittedly originated outside Uttar Pradesh and were destined outside Uttar Pradesh. There was no allegation that the goods being transported were different from those described in the tax invoice and e-way bill, nor was there any allegation that the goods were intended for supply within Uttar Pradesh. Consequently, no IGST, CGST or SGST liability could arise in Uttar Pradesh and therefore the State authorities lacked jurisdiction to impose penalties under Section 129.

Interpreting Section 6 of the CGST/SGST Acts and Section 4 of the IGST Act, the Court clarified that cross-empowerment under GST laws exists only between Central and State GST authorities within the same State and not between GST authorities of different States. Accordingly, GST authorities in Uttar Pradesh could not assume adjudicatory jurisdiction over transactions pertaining to West Bengal and Delhi.

The Court further held that absence of an e-invoice was merely a procedural deficiency which could at best be communicated to the competent authorities of the originating or destination States. Such discrepancy did not justify detention or confiscation by the transit-State authorities.

Importantly, the Court observed that a purchasing dealer cannot be penalised for the supplier’s failure to issue an e-invoice since the applicability of e-invoicing depends upon the supplier’s turnover, which remains within the supplier’s special knowledge.

Distinguishing the decisions in M/s Armour Security (India) Ltd. v. Commissioner, CGST and M/s ASP Traders v. State of U.P., the Court held that those decisions did not deal with the precise issue of jurisdiction of a pure transit State in inter-State trade transactions.

Accordingly, the penalty orders were quashed and directions were issued for immediate release of the goods and conveyances.

Case Name: M/s Maruti Enterprises, M/s Shiv Shanker Enterprises, M/s Praveen Supari Bhander and Shiva Enterprise Versus State of U.P. and another dated 14.05.2026

To read the complete  judgement 2026 Taxo.online 1426