GST Detention and Penalty Sustained Where Goods Move Under Invalid Tax Invoice Issued During Supplier's Suspended Registration

Overview of the Judgment

The Allahabad High Court, in Shri Baba Traders Vs State of U.P., delivered a significant ruling on the interplay between supplier registration suspension, validity of tax invoices, e-way bill obligations, and the right of an assessee to claim ownership of goods in transit under GST law. Multiple writ petitions raising an identical legal controversy were disposed of through a consolidated judgment, with one petition designated as the lead matter.

The Court firmly upheld the detention and penalty orders imposed on the assessee, holding that goods traveling without valid prescribed documents — where the supplier's GST registration stood suspended at the time of invoice issuance — cannot attract the benefit of owner-led release under the Circular dated 31.12.2018.

Background and Facts of the Case

The assessee, a GST-registered trading firm operating out of Jharkhand, was engaged in the purchase and sale of iron bars and angles. In the course of its regular business dealings, it procured a consignment of goods from M/s S.S. Enterprises, located at Andhua Fatti Sainik Colony, 40 Putta Road, Hodal Palwal, Haryana. The Haryana-based supplier issued a tax invoice dated 03.12.2025 for the said transaction.

While the goods were being transported, the consignment was intercepted by GST authorities. Upon inspection, it was discovered that no e-way bill accompanied the goods. The interception and detention occurred on 03.12.2025 at 7:05 PM, following which a series of statutory proceedings were initiated:

  1. MOV 01 was issued on 04.12.2025
  2. The driver's statement was recorded on 05.12.2025
  3. MOV 04 captured the physical verification of the consignment
  4. MOV 06 (formal detention order) was issued on 10.12.2025
  5. MOV 07 (show cause notice) was issued on 18.12.2025, proposing penalty under Section 129(1)(b) of the GST Act

In response to the show cause notice, the assessee came forward as the owner of the goods, requesting release under Section 129(1)(a) of the Act and relying on Circular No. 76/50/2018-GST dated 31.12.2018, which provides for release of detained goods when the owner steps forward. The appellate authority, vide order dated 24.12.2025, affirmed the original detention and penalty order, prompting the assessee to approach the High Court.

Arguments Advanced by the Assessee

Senior Counsel appearing for the assessee advanced the following contentions before the Court: