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Landmark Verdict by Andhra Pradesh High Court: Assessee Responsibility in GST Transactions Clarified

In a significant legal development, the Hon’ble Andhra Pradesh High Court issued a landmark ruling shedding light on the responsibilities of taxpayers in Goods and Services Tax (GST) transactions. The case of M/s Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. v. Deputy Assistant Commissioner [Writ Petition No.15481 of 2023 dated August 03, 2023] brought forth an intricate scenario that has now led to crucial clarifications in the realm of GST.


The case revolved around M/s. Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. (‘the Petitioner’) is a key player in the iron scrap trading business. The company had procured iron scrap from M/s. K.S. Enterprises (‘the Supplier’), based in Vijayawada, sold the goods to M/s. Radha Smelters Private Limited (‘the Buyer’) is in Sankarampet.

However, a disagreement erupted when the Revenue Department detained the goods during transit. The Department’s move was rooted in suspicion, claiming that the Supplier lacked a valid business premise in Vijayawada. Consequently, proceedings under Section 130 of the Central Goods and Services Tax Act, 2017 (‘the CGST Act’) were initiated against the Supplier, raising concerns about the Department’s targeting strategy.

Petitioner’s Arguments

The Petitioner contested the Department’s actions, asserting they had provided all required documents to prove their ownership of the goods in transit. Citing Section 129 of the CGST Act, which mandates action against the person transporting goods—namely, the Petitioner—, the company questioned the Department’s decision to focus on the Supplier. 

The Petitioner emphasized that they had duly verified the Supplier’s GST registration and had conducted legitimate bank transactions for payment. They highlighted that the Department’s suspicions regarding the Supplier’s registration status should not doubt the transaction’s legitimacy between the Petitioner and the Supplier.

Central Issue

The pivotal issue before the court was whether the Revenue Department had the authority to seize goods from the assessee based on actions taken against the Supplier.

Court’s Verdict

The Hon’ble Andhra Pradesh High Court, in its judgment on Writ Petition No.15481 of 2023, issued the following directives:

  1. Acknowledging that proceedings for detaining goods can be initiated if they are in transit violating the CGST Act, the court affirmed the Department’s right to pursue actions against the Supplier under Section 130 of the CGST Act for non-compliance with address details and business premises. However, the court clarified that this did not empower the Department to confiscate goods from the Petitioner solely based on their purchase from the Supplier.
  2. Noting uncertainty regarding the legitimacy of the Petitioner’s claim of purchasing goods from the Supplier, given the Supplier’s uncertain existence, the court stated that the Department could initiate proceedings under Section 129 of the CGST Act against the Petitioner. It ruled that an inquiry should be conducted, allowing the Petitioner to present their case.
  3. The court directed the release of the detained goods to the Petitioner upon depositing 25% of the goods’ value and executing a bond for the remaining balance. Additionally, the court ordered the release of the vehicles to the transporter.
  4. The court’s final verdict emphasized that the Petitioner’s responsibility was confined to demonstrating that they genuinely procured goods from the Supplier, verifying the Supplier’s GST registration via the GST portal.

This groundbreaking ruling by the Andhra Pradesh High Court clarifies the extent of an assessee’s liability in GST transactions, setting a precedent for similar cases across the jurisdiction.

Team Vakilsearch