GST Authority cannot detain goods/conveyance in transit for non-payment of tax by other person in supply chain

Last updated: 08 February 2022

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Quick Summary

The Punjab and Haryana High Court has ruled that GST authorities cannot detain goods or conveyances in transit if they are accompanied by the correct documentation, even if another party in the supply chain has not paid their tax. The court stated it's not a taxpayer's responsibility to verify tax payments of upstream suppliers. Penalties under Section 130 of the CGST Act require a direct intent to evade tax, which cannot be assumed due to the actions of others.

Court :
Punjab and Haryana High Court

Brief :
The Hon'ble Punjab and Haryana High Court in M/s. Shiv Enterprises v. State of Punjab and others [CWP-18392-2021 dated February 04, 2022] held that, GST Authorities cannot detain goods in conveyance without passing appropriate orders if goods are accompanied with the documents as prescribed and cannot proceed against the taxpayer for contravention of any provision of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). Further held that it is not the liability of the taxpayer to find out that whether or not other person in the supply chain has paid the tax and is the fundamental legal principle, that the law does not compel a man to do that which he cannot possibly perform.

Citation :
CWP-18392-2021 dated February 04, 2022

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