 "GST")
The Andhra Pradesh High Court has ruled that the goods and services tax (GST) authorities cannot seize items in transit without first conducting an inquiry into the authenticity of the transaction, even if the original supplier does not have GST registration.
The case relates to a trader who bought iron scrap from a company in Vijayawada, Andhra Pradesh, and subsequently sold it to another company based in Medak district, Telangana.
The goods were in transit on a truck when they were intercepted and detained by GST authorities. Their rationale for the detention was that the original supplier in Vijayawada did not have a GST registration since it had been suspended.
While the trader argued that the authorities purposefully disregarded the documents presented by the driver during the inspection, the authorities countered that the driver had failed to produce the purchase invoice or show the mode of payment for the purchase price.
The court ruled that although GST officers have the prerogative to initiate proceedings against the original supplier, they cannot confiscate the trader's goods merely because they were purchased from a company with a suspended registration. The official can, however, initiate an inquiry against both the trader and the driver, providing them with an opportunity to establish their case, it ruled.
Sandeep Sehgal, a partner at the tax and consulting firm AKM Global, remarked that the court's decision has provided much-needed clarity. It underscores that goods owned by a legitimate trader should not be subject to confiscation, regardless of whom he or she has purchased the goods from.
"The judgement enunciates the principle that the illegal act of one supplier may not warrant the same action to the other complying supplier," he said.
