Can a State GST Officer Stop, Detain or Penalise Goods Merely Passing Through That State? The Andhra Pradesh High Court Has an Answer

A Division Bench of the Andhra Pradesh High Court, comprising Hon'ble Justice R. Raghunandan Rao and Hon'ble Justice T.C.D. Sekhar, has pronounced a significant judgment dated 01.04.2026 in W.P. No. 541 of 2026 and batch (Golden Traders & Ors. vs. The Deputy Assistant Commissioner of State Tax & Anr.), disposing of nine writ petitions by a common order. The judgment addresses two critical questions that have been a persistent source of litigation under the GST regime: first, whether a State GST officer has jurisdiction to detain, seize, or confiscate goods that are merely transiting through that State in the course of an inter-State supply; and second, the limits of cross-empowerment under the GST enactments. The ruling has implications that extend well beyond Andhra Pradesh.

Background Facts

In all nine petitions, consignments were intercepted by officers appointed under the Andhra Pradesh Goods and Services Tax Act, 2017 (APGST Act), at various check posts within the State of Andhra Pradesh. Crucially, in every case, the point of origin of the goods was outside Andhra Pradesh, and the destination was also outside Andhra Pradesh — the goods were merely passing through the State. Proceedings were initiated under Section 129 of the GST Act (detention, seizure and release of goods and conveyances in transit) and in several cases escalated to Section 130 (confiscation of goods or conveyances and levy of penalty). The primary ground in almost all cases was alleged undervaluation of goods — i.e., the officer formed a view that the goods were grossly undervalued in the accompanying invoice/e-way bill. In one case (W.P. No. 3258 of 2026), the additional ground was absence of e-way bills.

In all cases except W.P. No. 3258, the consignments were admittedly accompanied by all documents required under Section 68 of the GST Act.

Issue I — Cross-Empowerment: Can State Officers Act Under the IGST Act?

The first question before the Court was whether officers appointed under the APGST Act are empowered to exercise jurisdiction under Section 129 or Section 130 in relation to transactions governed by the Integrated Goods and Services Tax Act, 2017 (IGST Act).

The Statutory Framework

Section 2(91) of the APGST Act defines "proper officer" as the Chief Commissioner or an officer of State tax assigned that function by the Chief Commissioner. The Court noted at paragraph 9 that such assignment, by its nature, confers jurisdiction only under the APGST Act. An officer so assigned does not, by virtue of that assignment alone, become empowered to act under the CGST Act or the IGST Act.

Cross-empowerment is addressed by Section 6 of the CGST Act and Section 4 of the IGST Act, both of which authorise State officers to function as "proper officers" under those Acts, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify.

The Competing Interpretations Before the Court

The Revenue argued that Section 6 of the CGST Act and Section 4 of the IGST Act themselves confer cross-empowerment on State officers as a matter of course, and that notifications issued thereunder only restrict or condition that power — they do not create it. On this reading, every officer appointed under the APGST Act is already a "proper officer" under the CGST and IGST Acts, unless a notification says otherwise.

The petitioners, on the other hand, placed reliance on the Madras High Court's ruling in TVL Vardhan Infrastructure vs. Special Secretary [2024 (16) CENTAX 509 (MAD)], which held that since no notifications had been issued for cross-empowerment (except for refunds under Chapter XI), State officers had no cross-empowerment at all, and proceedings initiated by them against taxpayers allotted to the Centre were without jurisdiction.

Why the Court Rejected the Revenue's Plain Reading — The Full Chain of Reasoning

This is the most important part of the judgment's analytical architecture, and the Court's reasoning deserves to be traced in full.

Step 1 — The absurdity produced by the Revenue's interpretation.

The Court tested the Revenue's interpretation by following it to its logical conclusion. If Section 6 of the CGST Act itself confers blanket cross-empowerment on all State officers to function as "proper officers" under the CGST and IGST Acts — subject only to such restrictions as notifications may place — then an asymmetry of a startling kind emerges. An officer appointed under the CGST or IGST Act cannot perform the function of a "proper officer" under those very Acts unless he is specifically assigned that function by the Commissioner in the Board. He requires an internal assignment of function before he can act. Yet, on the Revenue's reading, an officer appointed under the APGST Act would be empowered to perform the function of "proper officer" under the CGST Act or the IGST Act in relation to any taxpayer in the State, without any authorisation from either the Commissioner in the Board under the Central Act or the Chief Commissioner of the State. As the Court put it at paragraph 13:

"Such an interpretation, which confers such unfettered discretion on a State officer, under the Central Act, is clearly not permissible. The scheme, of the GST Acts, does not support this interpretation."

In other words, the Revenue's reading would place a State officer in a position of greater power under the CGST Act than an officer actually appointed under that Act — a result that is constitutionally and structurally indefensible.

Step 2 — The constitutional architecture of GST and why it matters.

The Court traced the constitutional foundation of the GST regime through Articles 246A and 269A. Article 246A(1) confers concurrent power on Parliament and State Legislatures to legislate on GST for intra-State supplies. However, Article 246A(2) and Article 269A confer exclusive power on Parliament to legislate on GST for inter-State supplies. IGST on inter-State transactions is therefore exclusively a Central levy, constitutionally placed beyond the State's legislative competence. This constitutional exclusivity has a direct bearing on how cross-empowerment must be construed — it cannot be read so broadly as to give State officers unfettered authority over transactions that are constitutionally the preserve of the Central Government.

Step 3 — The purpose for which cross-empowerment was introduced.

The Court then explained the structural problem that cross-empowerment was designed to solve. Under the GST scheme, a taxpayer became liable to pay tax on the same supply under the APGST, CGST, and IGST Acts. Central taxes were to be collected by Central officers, and State taxes by State officers. This created two problems: first, the danger of conflicting orders being passed by Central and State officers on the same supply; and second, the doubled compliance burden on taxpayers who would otherwise have to deal with two sets of officers, maintain two sets of documents, and file returns in duplicate. The Court summarised at paragraph 17 the solution that was devised:

"In order to relieve this complication, a scheme of cross empowerment was introduced. Under this method, a tax payer would be, allotted, administratively, to either the Centre or the State and the officers, appointed under the appropriate Act, would function as the 'proper officer' for that tax payer."

This is the key insight. Cross-empowerment was not introduced to give State officers general roving authority over all CGST/IGST matters. It was introduced as the mechanism by which a single officer — the one to whom the taxpayer had been administratively allotted — could discharge functions under both the Central and State Acts in relation to that taxpayer, thereby avoiding parallel proceedings and double compliance. The administrative allotment of the taxpayer is therefore not incidental to cross-empowerment — it is its very foundation.

Step 4 — The allotment framework under Circular No. 01/2017.

To operationalise this scheme, the GST Council in its 9th and 21st meetings laid down guidelines for dividing the taxpayer base between Centre and State, circulated as Circular No. 01/2017 dated 20.09.2017. Under this circular, taxpayers below ₹1.5 crore in turnover were divided 90% to States and 10% to Centre; taxpayers above ₹1.5 crore were divided equally, 50:50. Every registered taxpayer was thus allotted, by computer-based stratified random sampling, to either the Central or State tax administration. The circular itself noted that separate notifications on cross-empowerment would follow. This structure confirms that the administrative allotment precedes and conditions cross-empowerment — it is the allotment that determines which officer becomes the "proper officer" for a given taxpayer under both the Central and State Acts.

Step 5 — Support from the Supreme Court in Armour Security.

The Court drew further support from the Supreme Court's ruling in Armour Security (India) Ltd. vs. Commr. (CGST) [(2025) 145 GSTR 385 : 2025 SCC OnLine SC 1700], which had held that the cross-empowerment provision under Section 6(2) serves a twofold purpose:

"First, to insulate taxpayers from the prospect of being proceeded against by more than one authority for the same subject-matter; and secondly, to vest in the officers functioning under the CGST Act, the SGST Act, or the UTGST Act, to render a comprehensive order, thereby avoiding multiplicity of proceedings. Such a construction is also in consonance with the well-recognized principle of comity between jurisdictions, which mandates that coordinate authorities must act with mutual respect and due regard for each other's domain, so as to preclude the possibility of conflicting determinations on the same issue."

If a State officer were permitted to proceed against any taxpayer — whether allotted to the Centre or the State — without reference to the administrative allotment, both these purposes would be defeated. The taxpayer would be exposed to proceedings by multiple authorities, and the principle of comity between jurisdictions would be rendered meaningless.

The Court's Conclusion — and Its Departure from the Madras High Court

Having traced this entire reasoning chain, the Court held at paragraph 23:

"An officer, appointed under the APGST Act, is not automatically cross empowered to exercise any function, under the CGST Act or the IGST Act, unless the tax payer against whom any action is proposed had been administratively allotted to the State of Andhra Pradesh and the said officer has been appointed as the proper officer, in relation to such a tax payer. The same principle would apply vice versa to officers appointed under the CGST or IGST Acts."

In departing from the Madras High Court's view, the AP High Court took a more nuanced position. The Madras HC had held that without a specific notification, cross-empowerment does not exist at all. The AP HC held that the administrative allotment itself — operationalised through Circular No. 01/2017 — is the mechanism that activates cross-empowerment under Section 6, without requiring a further notification for each category of function. The difference is this: where the taxpayer has been allotted to the State, Section 6 operates to cross-empower the State officer in relation to that taxpayer, both under the CGST Act and the IGST Act. Where the taxpayer has been allotted to the Centre, the State officer receives no such cross-empowerment, and any proceedings initiated by him are without jurisdiction.

Cross-empowerment, in the AP High Court's formulation, is therefore taxpayer-specific, activated by administrative allotment, and operates symmetrically in both directions.

Issue II — Whether State Officers Have Jurisdiction Over Pure Transit IGST Transactions

Even accepting cross-empowerment for a taxpayer allotted to the State, the Court went further and addressed a distinct question specific to goods merely transiting through Andhra Pradesh. This is the most significant part of the ruling.

The Section 17 IGST Argument

The Court examined Section 17 of the IGST Act, which governs apportionment of integrated tax between the Centre and the States. The integrated tax on an inter-State supply is apportioned to the State where the supply takes place — which in the case of inter-State supply is broadly the destination State (or the State entitled to claim the place of supply). No part of the IGST on a Kerala-to-Delhi transaction, for instance, accrues to Andhra Pradesh merely because the goods pass through it.

The Court posed a pointed illustration at paragraph 29:

"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 the same or the owner of the goods pays a penalty or fine and gets his goods released. In such a case, State B is collecting penalties and fines or appropriating the sale price of the goods, in relation to transactions which are not taxable in State B. It may also be noted that there is no provision, under the GST Acts, for reimbursing the State share of penalty and/or fine, falling to State A or State C, collected by State B. Thus, amounts rightfully due to State A or State C are being appropriated, by State B."

The Court concluded that Section 129 or 130 cannot be pressed into service to vindicate such appropriation.

Final Holdings (Paragraph 37)

The Court crystallised its conclusions as follows:

1. A State officer is cross-empowered under the CGST/IGST Act only in relation to taxpayers administratively allotted to that State, where the officer has been designated as proper officer for that function by the Chief Commissioner — and vice versa for Central officers.

2. A proper officer under the APGST Act assigned functions under Section 129/130 can discharge those functions under the CGST Act in relation to intra-State sales.

3. In relation to inter-State sales, the APGST proper officer can exercise Section 129/130 under the IGST Act only when Andhra Pradesh is entitled to an allocation of a share of the tax under Section 17 — i.e., where AP is the destination/place of supply.

4. A proper officer under the APGST Act cannot discharge functions under the IGST Act in relation to inter-State sales which originate outside the State and culminate outside the State.

5. Where discrepancies are found in any movement of goods under the IGST Act, it is 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.

   
   

Issue III — Undervaluation Cannot Ground a Detention or Confiscation

The Court also addressed the second contention of the petitioners — that questions of valuation cannot be examined under Section 129 or Section 130. On this issue, the Court found consistent support across multiple High Courts and expressed its agreement with all of them.

The Kerala High Court in Alfa Group vs. The Assistant State Tax Officer [2020 (34) G.S.T.L. 142] had held that no provision under the GST Act mandates that goods shall not be sold at prices below MRP, and that arbitrary detention on such grounds erodes public confidence in the system of tax administration. The Chhattisgarh High Court in K.P. Sugandh Ltd. & Others vs. State of Chhattisgarh [2020 (38) GSTL 317] approved that view and held that undervaluation in an invoice cannot be a ground for detention; if such discrepancy is found, the Inspecting Authority ought to intimate the Assessing Authority for initiation of appropriate proceedings.

The Gujarat High Court in Panchi Traders vs. State of Gujarat [2025 (12) TMI 941] provided the most detailed framework, holding that the power of confiscation during transit can be invoked only in cases of blatant violation with a direct nexus to the intention to evade payment of tax — such as absence of documents, fake or forged documents, fake registration, or a complete mismatch of goods. The Court explicitly held that "the proper officer cannot venture into the assessment and valuation of goods at the time of interception of vehicle, and resort to seizure and confiscation of goods and conveyance by resorting to the entries in portal." Minor aberrations in value or description do not satisfy this threshold.

The AP High Court at paragraph 33 expressed its full agreement with this view.

The W.P. No. 3258 Situation — Absence of E-Way Bills

In this petition, the respondents contended that the driver had refused to give details, and upon online verification no e-way bills were found. They further contended that the e-way bill was generated by the petitioner after the first inspection had already been completed. The Court examined Rule 138C of the CGST Rules, 2017, which requires a summary report of every inspection to be recorded online in Part A within 24 hours and a final report in Part B within three days. The Court found that the alleged first inspection had not been recorded online at all, and the subsequent inspection report made no mention of any prior inspection. On this basis, the respondents' contention was rejected.

The Punjab Question — A Matter of Immediate Significance

The judgment delivers its primary ruling in the context of Andhra Pradesh, but the legal principles enunciated — particularly on cross-empowerment and the proper officer framework — are of general application across the country.

The cross-empowerment principles enunciated in this judgment have a direct bearing on a question of considerable practical importance in Punjab. Under Circular No. 01/2017, a substantial portion of Punjab's registered taxpayers — particularly those with turnover above ₹1.5 crore — have been administratively allotted to the Central tax administration. The AP High Court has held, unambiguously, that a State officer does not acquire cross-empowerment under the CGST Act in relation to a taxpayer allotted to the Centre, and that the "proper officer" for such a taxpayer, for the purposes of the CGST Act, is the Central officer to whom the taxpayer has been assigned. It is worth noting that this interpretation is not without controversy — other High Courts have taken differing views on the extent of cross-empowerment, and the question cannot be said to be finally settled. Nevertheless, the reasoning of the AP High Court raises a legitimate and serious question that any Punjab business which has faced proceedings at the hands of a State GST officer ought to examine carefully with its tax advisor: whether, having regard to its administrative allotment, the officer who initiated those proceedings was, in law, the proper officer for that purpose at all.

Conclusion

The judgment in Golden Traders & batch vs. The Deputy Assistant Commissioner of State Tax is a significant contribution to the evolving jurisprudence on GST enforcement jurisdiction. Its key takeaways are:

On transit goods: A State GST officer cannot exercise powers under Section 129 or Section 130 of the GST Act in respect of inter-State supplies that originate outside the State and culminate outside the State. The State has no fiscal interest in such transactions under Section 17 of the IGST Act, and accordingly no authority to detain, seize, or confiscate goods or levy penalties thereon. Where discrepancies are found, the only permissible course is to forward the matter to the proper officer of the consignee or consignor.

On undervaluation: Mere undervaluation in an invoice cannot be a ground for detention or confiscation under Section 129 or 130. The threshold for confiscation during transit is a blatant violation directly establishing an intention to evade tax — not a disputable difference in declared value.

On cross-empowerment: The AP High Court has held that cross-empowerment of State officers under the CGST/IGST Act is taxpayer-specific and follows the administrative allotment of the taxpayer. On this reasoning, a State officer does not acquire the status of "proper officer" under the CGST Act in relation to a taxpayer allotted to the Central tax administration. This interpretation remains the subject of divergent views across High Courts and is not yet finally settled, but it raises a significant question that taxpayers facing proceedings before the non-assigned authority would do well to examine.

For a detailed evaluation of your specific matter in light of this judgment, you may contact Singh & Gupta Chartered Accountants, Jalandhar at +91 98760 66447, +91 94650 22100 or write to us at info@singhandgupta.com. Visit us at singhandgupta.com.

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