The Supreme Court has dismissed the Uttar Pradesh Government’s special leave petitions challenging an Allahabad High Court judgment which held that State GST authorities lacked jurisdiction to impose penalties on goods merely passing through Uttar Pradesh during an inter-State supply between two other States.

A Bench of Justice Aravind Kumar and Justice Vipul M. Pancholi, on October 16, 2026, declined to interfere with the High Court’s decision concerning M/s Maruti Enterprises and connected matters.

Buy Now: 160+ GST E-Magazine September 2026

The dispute centred on whether GST officers in a transit State could detain goods and impose penalties for alleged documentary irregularities when the supply neither originated nor terminated in that State.

The Supreme Court dismissed the petitions through a brief order without separately examining the statutory issues. The detailed reasoning on the limits of transit-State jurisdiction appears in the Allahabad High Court’s judgment dated May 14, 2026, delivered by Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi.

The appellant/assessee registered under the Delhi GST law, purchased 30,100 kilograms of dried areca nuts from a supplier registered in West Bengal.

The consignment was transported by road from Falakata in West Bengal to New Delhi. It was accompanied by a physical tax invoice and an e-way bill.

Uttar Pradesh GST officers intercepted the vehicle in Gautam Buddh Nagar on January 24, 2026. Physical verification followed on January 26, after which the authorities objected that the consignment was not accompanied by an electronic tax invoice as required under Rule 48 of the GST Rules.

The department maintained that the supplier’s turnover exceeded the applicable ₹5 crore threshold and that an e-invoice was consequently mandatory. Maruti Enterprises admitted that its supplier had not issued an e-invoice, but described the omission as a technical defect.

Following a show-cause notice dated January 29, 2026, the authorities imposed a penalty of ₹33,18,525 through an order dated February 4, 2026.

The High Court also considered four connected petitions involving separate penalty orders against other traders.

The State defended its action by relying on the inspection and detention provisions of the GST laws, the e-way bill rules, and the statutory provisions governing cross-empowerment of Central and State tax officers.

According to the department, the absence of a mandatory e-invoice meant that the goods were being transported without the prescribed documentation, justifying detention and penalty proceedings.

The authorities also raised concerns about the parties and the supply chain. They alleged that the supplier had purchased areca nuts from firms whose registrations had been suspended or cancelled, and that the goods were loaded from a location other than the supplier’s registered business premises.

The department further referred to information that Maruti Enterprises was not registered to trade in dried areca nuts and that its registration had subsequently been suspended during the pendency of the writ proceedings.

The traders challenged the State’s jurisdiction, arguing that the transactions involved supplies between other States and that Uttar Pradesh’s role was confined to providing a transit route.

The High Court drew a clear distinction between the authority to stop and inspect a vehicle and the jurisdiction to impose a penalty on the underlying transaction.

It recognised that GST officers in Uttar Pradesh could stop vehicles, examine documents and physically verify goods travelling through the State, even where the transaction did not generate any tax incidence there.

However, the Court held that those inspection powers did not, in the circumstances before it, establish jurisdiction to penalise an inter-State supply that originated and concluded outside Uttar Pradesh.

The Court confined its examination to transactions using Uttar Pradesh solely as a transit State. It did not decide cases in which the supply originated or terminated within Uttar Pradesh.

The State placed substantial reliance on Section 6 of the CGST and State GST enactments and Section 4 of the IGST Act.

Rejecting its interpretation, the High Court explained that cross-empowerment had to operate within the statutory framework governing the relevant transaction and jurisdiction.

In the transaction before it, the Court considered that cross-empowerment could operate between the relevant Central and State authorities in West Bengal and Delhi. It did not authorise Uttar Pradesh officers to assume penalty jurisdiction merely because the goods physically crossed that State.

The High Court distinguished the Supreme Court’s decision in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate & Another. It explained that the decision addressed cross-empowerment between Central and State tax administrations over a taxpayer, rather than jurisdiction between the administrations of two different States in the circumstances under consideration.

It also distinguished M/s ASP Traders v. State of U.P. and Others. According to the High Court, that decision concerned the requirement to issue a reasoned order in Form GST MOV-09 and upload the corresponding summary in Form GST DRC-07. The jurisdiction of a pure transit State to detain the goods had not been decided there.

The High Court attached significance to the undisputed origin and destination of the goods and the documentation establishing their movement.

It recorded that there was no allegation that the goods differed from those described, that they originated in Uttar Pradesh, that they were intended for consumption within Uttar Pradesh, or that the documents produced were bogus.

In those circumstances, Uttar Pradesh was a pure transit State with no tax incidence arising from the transaction.

The Court treated the absence of an e-invoice as an unexplained anomaly that could be communicated to the competent authorities in West Bengal and Delhi. It did not hold that the e-invoice requirement ceased to apply.

Similarly, the concerns regarding the supplier’s purchases and the subsequent suspension of the recipient’s registration did not answer the central jurisdictional question before the Court.

Allowing the five writ petitions, the High Court quashed the individual penalty orders and directed the immediate release of the goods and vehicles. It made no order as to costs.

The penalties challenged before the High Court were ₹33,18,525 against Maruti Enterprises; ₹40,30,299 against Praveen Supari Bhander; ₹40,38,458 and ₹40,71,675 in two matters involving Shiv Shanker Enterprises; and ₹29,01,150 against Shiva Enterprises.

The Supreme Court’s subsequent dismissal of the State’s special leave petitions leaves the challenged High Court judgment undisturbed. Its brief dismissal order does not contain an independent interpretation of the GST provisions.

The distinction emerging from the High Court’s ruling is that inspection of goods passing through a State and jurisdiction to impose penalties are separate questions. On the facts established in these cases, alleged irregularities could be referred to the authorities concerned with the supply, but did not confer penalty jurisdiction on Uttar Pradesh merely because the goods travelled through it.

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: S. 27(d) Drug Offence Bailable: Pharma Director Granted Bail In Substandard Medicine Case: Court