Interstate Trade: State Government Cannot Detain Goods Until Central Government Notifies Documents Under IGST Act [Read Judgment]

The question of the amount of power possessed by the State Government to detain goods for alleged non compliance with the requirement of carrying the prescribed documents under the IGST Act came for consideration before the Kerala High Court. In the instant case, the goods of the petitioner were detained after providing a notice to the petitioner.

It may be noted that as per section 20 of the IGST Act, the provisions of Central Goods and Services Tax Act relating to inspection, search, seizure and arrest apply mutatis mutandis so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under the IGST Act. Further, The CGST Rules, 2017, for carrying out the provisions specified in section 20 of the Integrated Goods and Services Tax Act, 2017 shall, so far as may be, apply in relation to integrated tax as they apply in relation to central tax.

Examining the provisions of the IGST Act, CGST Act and SGST Act, the Hon’ble High Court found that although the power to prescribe the documents that are to accompany the transportation of goods in the course of interstate trade is conferred on the Central Government, the Central Government has, till date, not notified the documents that have to be carried by a transporter of the goods in the course of interstate movement. Without such a notification, the State Government does not have power to detain goods on the basis that prescribed documents are not being carried.

It has been stated in Paragraph 3 of the judgment as follows:

“Under the said circumstances, and finding that neither the State Legislature nor the State Government would have the power to make laws/rules to govern interstate movements of goods in the course of trade, and for the purposes of levy of tax, I am of the view that detention in Ext.P5, for the sole reason that the transportation was not accompanied by the prescribed documents under the IGST Act/CGST Act/CGST Rules, cannot be legally sustained. I therefore, allow the writ petition by making the interim order absolute.”

Therefore, the Hon’ble Court held that detention of goods for the reason that the prescribed documents under the IGST Act, CGST Act or CGST Rules were not carried during transportation of the goods, cannot be legally sustained.

Read the Judgment Here