Author: Ashwarya Sharma, Advocate, Co-Founder & Legal Head, RB LawCorp
Published on: 06/06/2026
Introduction: Does “One Nation, One Tax” Mean Every State Can Exercise GST Jurisdiction?
The introduction of the Goods and Services Tax (“GST”) was hailed as one of India’s most transformative fiscal reforms. Built around the vision of “One Nation, One Tax,” the new regime sought to eliminate multiple indirect tax barriers, simplify compliance, and create a truly unified national market.
But while GST harmonised taxation, has it also created a system where every State can exercise enforcement powers over every inter-State transaction?
This important question has increasingly surfaced before constitutional courts, particularly in cases where goods merely pass through an intermediary State during transportation from one State to another.
Can a transit State, having no tax stake in the transaction, detain goods and impose penalties simply because the vehicle passed through its territory?
The Hon’ble Allahabad High Court addressed this important issue in Maruti Enterprises Vs. State of U.P. & Another (2026-TIOL-697-HC-ALL-GST), substantially reaffirming the principles earlier laid down by the Hon’ble Andhra Pradesh High Court in Golden Traders & Ors. Vs. Deputy Assistant State Tax Officer (2026-TIOL-508-HC-AP-GST).
The ruling carries significant implications for the interpretation of:
- Cross-empowerment under GST,
- Jurisdiction of the “Proper Officer”,
- Inter-State movement of goods,
- Sections 68 and 129 of the GST laws,
- Article 301 of the Constitution of India, and
- The constitutional guarantee of free trade and commerce.
Perhaps most importantly, the judgment reiterates that while GST may be a unified tax regime, jurisdiction cannot become borderless.
Factual Background
The petitioner was registered under the Delhi GST Act and had purchased dried Areca nuts from a supplier located in West Bengal.
The transaction was straightforward:
- Supplier: West Bengal
- Purchaser: Delhi
- Destination: New Delhi
- Transportation supported by valid tax invoices and statutory documents.
During transit, when the vehicle reached Gautam Buddh Nagar (Noida), Uttar Pradesh GST authorities intercepted it.
The authorities alleged certain deficiencies in the accompanying documents and initiated detention and penalty proceedings under Section 129 of the UP GST Act.
The dispute therefore arose because Uttar Pradesh was merely a transit State.
The goods neither originated there nor were intended to be delivered there.
Core Questions Before the High Court
The Allahabad High Court was essentially called upon to decide two important issues:
1. Can GST authorities of a transit State detain goods moving between two other States?
Specifically, whether Uttar Pradesh authorities possessed jurisdiction to invoke Sections 68 and 129 in relation to an inter-State transaction between West Bengal and Delhi.
2. Does Cross-Empowerment Create Pan-India Jurisdiction?
The Court also examined whether:
- Section 6 of the GST Acts,
- Section 4 and Section 20 of the IGST Act, and
- Rules 138A, 138B and 138C
confer unrestricted enforcement powers upon officers of every State.
Petitioner’s Principal Arguments
The petitioner strongly relied upon Article 301 of the Constitution, which guarantees freedom of trade, commerce and intercourse throughout the territory of India.
According to the petitioner:
- Uttar Pradesh had no taxable nexus with the transaction;
- The goods merely passed through the State;
- No provision under GST authorises every transit State to exercise penal jurisdiction.
The petitioner argued that GST authorities may inspect goods for regulatory purposes, but they cannot proceed to:
- Detain goods,
- Confiscate consignments, or
- Impose penalties,
when the transaction neither originates nor terminates within their State.
Allowing otherwise would fundamentally defeat the constitutional vision of seamless inter-State commerce.
Stand Taken by the State of Uttar Pradesh
The State defended its action by relying primarily upon:
- Section 68,
- Section 129,
- Rules 138A, 138B and 138C,
- Section 4 of the IGST Act, and
- The doctrine of cross-empowerment.
According to the State:
- GST officers are authorised to verify movement of goods;
- Cross-empowerment allows State officers to exercise powers under the IGST framework;
- Document discrepancies justified detention proceedings.
The State further argued that Article 301 permits reasonable restrictions aimed at preventing tax evasion.
Findings of the Allahabad High Court
1. Regulatory Inspection Is Permissible
The Court accepted that authorities of a transit State may:
- Stop vehicles,
- Verify documents,
- Conduct physical inspection of goods.
Such checks constitute reasonable regulatory measures consistent with the GST framework.
However, the Court drew an important distinction between:
Power to inspect and Power to punish.
2. Cross-Empowerment Has Jurisdictional Limits
One of the most significant aspects of the judgment is its interpretation of cross-empowerment.
The Court rejected the argument that Section 6 creates unrestricted pan-India enforcement authority.
Instead, it held that cross-empowerment primarily operates:
- Between Central and State authorities,
- Within the same territorial State,
- In relation to taxable events connected with that State.
It does not create horizontal jurisdiction enabling one State to adjudicate transactions belonging to another.
3. Revenue Nexus Remains Fundamental
The Court observed that:
- The transaction originated in West Bengal;
- The goods were destined for Delhi;
- No tax incidence arose within Uttar Pradesh.
Accordingly, Uttar Pradesh had no fiscal stake in the transaction.
While discrepancies, if any, could certainly be communicated to the competent authorities, the transit State could not proceed to:
- Detain the goods,
- Confiscate the consignment, or
- Levy penalties.
The Court thus reaffirmed that coercive jurisdiction must remain connected with revenue jurisdiction.
4. Article 301 Protects Against Multiple Enforcement Actions
Perhaps the most practical concern highlighted by the Court was the possibility of repeated enforcement actions.
The Court observed that if every transit State were allowed to invoke Sections 129 and 130, a consignment travelling from Kerala to Jammu & Kashmir could potentially face detention proceedings in every State through which it passes.
Such a consequence would substantially impair the constitutional guarantee of free inter-State trade.
The Court therefore held that jurisdiction must be interpreted in a manner that preserves the constitutional objective underlying Article 301.
5. Reinforcing the Andhra Pradesh High Court’s Decision in Golden Traders
The Allahabad High Court substantially followed the earlier ruling of the Andhra Pradesh High Court in Golden Traders.
Both Courts have now recognised a common principle:
A transit State may inspect goods, but absent a revenue nexus, it cannot ordinarily assume coercive penal jurisdiction over inter-State transactions.
This emerging judicial consistency could significantly influence future GST enforcement practices.
Why This Judgment Matters
The significance of the ruling extends far beyond a single detention proceeding.
It clarifies several foundational principles of GST administration:
First,
“One Nation, One Tax” does not mean “One Nation, Unlimited Jurisdiction.”
Secondly,
Cross-empowerment cannot be interpreted as conferring unrestricted pan-India enforcement powers.
Thirdly,
Regulatory inspection and coercive penal action are legally distinct powers.
Fourthly,
Fiscal nexus remains an essential component of GST jurisdiction.
Finally,
Article 301 continues to serve as an important constitutional safeguard against excessive interference with inter-State trade.
Broader Implications for GST Enforcement
The judgment is likely to have substantial implications for disputes involving:
- E-way bill interceptions,
- Detention under Section 129,
- Confiscation proceedings under Section 130,
- Inter-State movement of goods,
- Proper officer jurisdiction,
- Cross-empowerment under GST,
- Transit State enforcement actions.
With GST authorities increasingly invoking detention provisions across India, the decision provides much-needed judicial clarity regarding the territorial limits of enforcement powers.
Conclusion
The decision in Maruti Enterprises represents another important milestone in the evolving jurisprudence surrounding GST enforcement and the doctrine of the “proper officer.”
While recognising the legitimate need for regulatory oversight, the Allahabad High Court has reaffirmed that jurisdiction under GST cannot become limitless merely because the tax regime is harmonised.
The ruling carefully balances:
- Revenue protection,
- Administrative efficiency,
- Constitutional guarantees, and
- The need for seamless inter-State commerce.
Together with the Andhra Pradesh High Court’s decision in Golden Traders, the judgment sends a powerful message:
Even under a unified tax system, jurisdiction must continue to rest upon statutory assignment, territorial competence, and fiscal nexus.
Ultimately, the decision reinforces a fundamental constitutional principle:
A seamless national market requires not only uniform taxation, but also disciplined exercise of jurisdiction consistent with the rule of law.
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(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
