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When GST Enforcement Crossed Its Natural Boundaries In one of the most significant GST judgments delivered in recent times, the Allahabad High Court in M/s Maruti Enterprises v. State of U.P. and Another [2026-VIL-515-ALH dated 14.05.2026] delivered an extensive 34-page judgment examining the power
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The main issue was whether GST authorities of a transit state (Uttar Pradesh) had the jurisdiction to detain goods and impose penalties on inter-state consignments merely passing through their territory, even if the goods originated and were destined outside that state.
Yes, transit state authorities can inspect goods and verify accompanying documents to ensure compliance and prevent tax evasion. However, the power to impose penalties is limited.
Inspection and verification are regulatory powers, while detention and penalty proceedings carry fiscal consequences. Transit states can inspect but cannot impose penalties unless a taxable event arises within their jurisdiction.
The judgment protects free inter-state trade by preventing transit states from imposing penalties on goods merely passing through, which could lead to repeated detentions and penalties across multiple states and undermine the constitutional guarantee of free movement of goods.
The court held that if the physical invoice is genuine and the movement of goods is not disputed, the purchasing dealer cannot be penalized solely because the supplier failed to issue an e-Invoice, as the obligation depends on the supplier's turnover.
The court clarified that cross-empowerment allows Central and State GST authorities within the same state to exercise powers, but it does not authorize the GST authorities of one state to exercise penal jurisdiction over transactions substantially connected with another state.
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