Andhra Pradesh High Court Holds State GST Cannot Assess IGST On Imports, Quashes Notice Against Avanti Feeds

The Andhra Pradesh High Court on 1 April set aside a show-cause notice issued to Avanti Feeds Limited, holding that State GST authorities have no jurisdiction to assess or recover Integrated GST (IGST) on imported goods.

A Division Bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar ruled that such powers vest exclusively with customs authorities under the Customs Act. The Bench observed:

“Another aspect of this matter which would also require to be noticed is the language of the proviso to Section 5(1). The said integrated tax would be levied and collected at the point when duties of customs are levied. In a large number of cases, customs duties would be levied and collected at the point of import. An officer under the State GST Act or the Central GST Act, who has been notified as the proper officer, situated in a State, which is not the entry point, of the goods, into India, would not be able to exercise jurisdiction at the point of entry of goods. Such jurisdiction can obviously be exercised only by the customs officers under the Customs Act.”

The case arose from a notice issued by the Deputy Commissioner of State Tax under Section 73(5) of the AP GST Act, disputing Avanti Feeds Limited's claim of exemption on certain imported inputs used in manufacturing aquatic feed.

Avanti Feeds Limited, administratively under Central GST jurisdiction, challenged the notice as being without authority and also assailed Circular No. 80/54/2018-GST dated 31 December 2018. It contended that once IGST is levied on imports through the Customs framework, only customs authorities can undertake assessment and recovery, and no GST officer, whether State or Central, can assume such jurisdiction.

It further argued that, being assigned to Central authorities, State GST officers could not invoke cross-empowerment provisions. It also pointed out that the impugned circular had already been struck down by the Madras High Court and could not be relied upon.

The State, in response, relied on Section 6 of the AP GST Act, arguing that GST officers are cross-empowered to act under CGST and IGST enactments. It also contended that the writ petition was premature as it was filed against a show-cause notice without exhausting alternate remedies.

The High Court, while examining maintainability, held that interference at the show-cause stage is permissible where the notice is issued without jurisdiction.

On merits, the Court held that the scheme of the IGST Act, particularly the proviso to Section 5(1) read with the Customs Act, makes it clear that IGST on imported goods is to be levied, assessed, and collected as part of customs duty. Consequently, the entire process of assessment, including determination of exemption and classification, falls within the exclusive domain of customs authorities.

Rejecting the State's reliance on cross-empowerment, the Court clarified that such empowerment applies only where the taxpayer is administratively assigned to the State authorities. In this case, Avanti Feeds Limited had been administratively allotted to the Central Government; State authorities could not assume jurisdiction under the IGST Act.

The Court also noted that the impugned circular had been struck down by the Madras High Court, and following settled law, such a declaration renders the circular inoperative nationwide.

Accordingly, the Court allowed the writ petition and quashed the impugned notice. It clarified, however, that appropriate authorities, including customs authorities, may initiate proceedings in accordance with law if any liability subsists.

For Petitioner: Sri K. Vivek Reddy, senior counsel appearing on behalf of Sri Vimal Varma Vasi Reddy

For Respondent: Harinath N, Deputy Solicitor General of India