Roadside GST Inspections Cannot Decide Valuation Disputes or Impose Penalties: HC Holds Release of Seized Goods

The High Court of Andhra Pradesh at Amaravati has recently heard several writ petitions simultaneously, as all the petitions were based on a common issue filed by different traders, including Golden Traders, T.M. Enterprises, Al Badar Spices, R.G. Traders, Shiva Traders, Sreekrishna Traders, and others. The final decision has been announced by Justices R. Raghunandan Rao and T. C. D. Sekhar.

In all these cases, the tax authorities had initiated proceedings under Section 129 or Section 130 of the Central Goods and Services Act, 2017, on the grounds that the goods were significantly undervalued. However, the petitioner argued that all required transport documents under Section 68 were available in most cases. The Court examined whether tax officials at check posts had the authority to investigate the valuation of goods during transit. 

To announce a decision on this issue, the court reviewed earlier various High Court judgements (Such as Alfa Group vs. The Assistant State Tax Officer, State Goods and Service Tax Department & Ors and K.P. Sugandh Ltd & Ors vs. State of Chhattisgarh & Ors and Others) based on the same issue, all ruling that valuation disputes cannot be decided during proceedings under Sections 129 or 130. Such issues must be handled by the proper assessing authority during assessment proceedings, not by officials conducting roadside inspections.

Another key issue raised before the court was whether authorities at the checkpost of the state, through which the goods are passing, can confiscate or impose penalties on goods that are in transit. On this issue, the court noted that it is not legally allowed for the tax authorities in a transit state to impose penalties or confiscate goods for alleged tax evasion that may relate to another state. Considering the aforesaid findings, the court held that the goods that have been confiscated under the impugned orders in the present cases need to be released.

In one case, officials claimed that the driver failed to provide details and that the e-way bill was generated only after inspection. However, the Court found procedural inconsistencies, including failure to record the first inspection as required under Rule 138C of the CGST Rules.

Considering the aforementioned factors, the Court allowed the interlocutory applications and ordered the immediate release of the seized goods and vehicles. It also criticised the earlier valuation process as one-sided. The Court directed authorities to collect fresh samples in the presence of the petitioners, divide them into three sealed portions, and forward them to the appropriate assessing authority for further proceedings if necessary.