Allahabad HC: State GST Officers Can Exercise Central & IGST Powers

In a significant ruling that clarifies the administrative machinery under the GST regime, the Allahabad High Court has held that officers appointed under the State Goods and Services Tax (SGST) Act are automatically authorized to function as "proper officers" for the purposes of the Integrated GST (IGST) and Central GST (CGST) Acts. This verdict reinforces the collaborative "one nation, one tax" framework and strengthens the hands of tax authorities in enforcing compliance.

The court delivered this judgment while dismissing a writ petition filed by Shree Maa Trading Company, challenging the seizure of its goods and the subsequent penalty orders.

The Case at a Glance: The Interception and Dispute

The facts of the case are typical of many GST enforcement actions:

• The Movement: Goods belonging to Shree Maa Trading Company were being transported in an interstate journey from Delhi to Raipur.

• The Interception: On May 26, 2025, the transporting vehicle was intercepted by Uttar Pradesh State GST officers at Jhansi.

• The Initial Default: The petitioner's counsel argued that although the goods were accompanied by all proper documents (like e-way bill and invoice), the truck driver failed to produce them at the precise moment of interception.

• The Action Taken: The officers, suspecting a violation, proceeded to detain and later seize the goods. They passed orders under Section 129 of the CGST Act, imposing a penalty.

• The Challenge: The company challenged the orders on two primary grounds:

  1. Jurisdiction: They argued that State GST officers had no legal power to act against goods in interstate transit because no specific notification had been issued under the IGST Act authorizing them to do so.

  2. Classification of Penalty: They contended that the penalty should have been levied under a less stringent clause [Section 129(1)(a)] since they were the genuine owners of the goods, and not under the stricter clause [Section 129(1)(b)].

The Court's Reasoning and Verdict

The Allahabad High Court meticulously examined the legal provisions and rejected the petitioner's arguments.

1. On the Core Issue of Jurisdiction:

The court found the state's arguments compelling. The ruling hinges on the interpretation of key sections:

• Section 6 of the CGST Act: This section allows for the "cross-empowerment" of officers. It states that an officer appointed under the SGST Act is deemed to be empowered under the CGST Act as well.

• Section 4 of the IGST Act: This section states that the officers appointed under the SGST and CGST Acts are authorized to be the "proper officers" for the IGST Act, subject to such exceptions and conditions as the government may notify.

• Rule 20 of the CGST Rules: This rule further operationalizes this by stating that a proper officer for the purposes of the IGST Act is the one who has been assigned that function by the Commissioner.

The court concluded that the law provides a built-in mechanism for cross-empowerment. No separate, standalone notification is required to authorize a state officer to act under the CGST or IGST laws. The very act of their appointment under the SGST Act grants them this power, unless specifically exempted by a notification.

2. On the Issue of Penalty and Documents:

The court sided with the tax authorities on the factual matrix. It noted that:

• The driver's failure to produce documents at the time of interception is a valid ground for initiating action.

• More critically, the state counsel's revelation that upon deeper verification, the transactions were found to be "bogus" (as neither the seller nor the buyer had recorded them in their GST returns) severely weakened the petitioner's case of being a bona fide owner.

• Given the suspicion of a fictitious transaction, the officers were justified in their actions and the classification of the penalty.

Frequently Asked Questions (FAQs)

Q1: What is a "Proper Officer" under GST?
A: A "Proper Officer" is an official who is authorized by the GST law to undertake specific tasks, such as inspection, search, seizure, arrest, and passing adjudication orders. Their power is derived from their appointment notification and the specific functions assigned to them.

Q2: Why was the petitioner arguing about jurisdiction?
A: The goods were in interstate transit, which falls primarily under the IGST Act. The petitioner argued that only Central GST officers, not State GST officers, had the natural jurisdiction to act in such cases unless a specific notification was issued.

Q3: What does this ruling mean for businesses?
A: This ruling clarifies that businesses can be inspected and held accountable by any GST officer (State or Central) during transit, regardless of the journey's nature (intrastate or interstate). It removes a potential legal loophole and widens the net of enforcement.

Q4: Does this mean State and Central officers have the same power everywhere?
A: While the principle of cross-empowerment is established, the administrative execution is guided by the Commissioner's instructions. In practice, States and the Centre often have an arrangement where officers of one authority do not initiate proceedings against taxpayers assigned to the other authority without prior administrative approval, to avoid duplication and harassment.

Q5: What is the key difference between Section 129(1)(a) and 129(1)(b)?
A:

• Section 129(1)(a) applies in cases where there is a technical lapse (e.g., a missing e-way bill) but the taxpayer is able to prove the genuineness of the transaction. The penalty is lower (e.g., 100% of the tax amount).

• Section 129(1)(b) applies in cases of outright evasion, where the goods are suspected to be smuggled or part of a fraudulent transaction. The penalty is higher (e.g., 200% of the tax amount). The court agreed that the latter was applicable here due to the bogus nature of the transaction.

Conclusion

The Allahabad High Court's judgment is a robust affirmation of the integrated structure of India's GST system. By solidifying the principle of automatic cross-empowerment, it ensures that the entire GST officer corps—both State and Central—can function seamlessly to check tax evasion and enforce compliance across the country. For businesses, it serves as a critical reminder of the importance of meticulous documentation and the fact that the legitimacy of their transactions can be scrutinized by any authorized GST officer at any point. The ruling effectively closes a potential legal ambiguity and strengthens the unified front of GST administration.