The Lucknow Bench of the Allahabad High Court on December 1, 2025, came down heavily on the Uttar Pradesh government over the sudden invocation of bank guarantees worth more than ₹19 crore furnished by Instakart Services Pvt. Ltd. in a nine-year-old tax dispute.
The court described the State’s conduct as careless and troubling, ordering senior officials to personally explain their actions.
Background of the Case
The dispute traces back to 2016, when Instakart Services Pvt. Ltd., a logistics arm associated with e-commerce operations, challenged amendments made by the Uttar Pradesh government to its entry tax law.
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Through U.P. Act No. 18 of 2016, the State sought to levy entry tax on online and e-commerce transactions. Instakart argued that the State Legislature lacked the authority to impose such a tax, especially through an amendment rather than a fresh law.
In December 2016, the High Court had granted interim protection to the company, allowing it to operate subject to furnishing bank guarantees for the disputed tax amounts for the financial years 2016-17 and 2017–18.
Despite the interim order remaining in force, the writ petition stayed pending for nearly nine years. During this period, Instakart furnished multiple bank guarantees totaling over ₹19 crore, as directed by the court.
Recently, however, the State tax department invoked the bank guarantees for the two financial years, prompting Instakart to move the court again. The company also filed a contempt petition, alleging violation of the High Court’s 2016 interim order.
Court’s Observations
The bench of Justice Sangeeta Chandra and Justice Syed Qamar Hasan Rizvi expressed strong dissatisfaction with the State’s handling of the litigation.
The judges noted that the interim order passed in 2016 was based on a prima facie finding that the State lacked legislative competence to impose entry tax on e-commerce transactions through the 2016 amendment.
“The amendment appeared to introduce a completely new levy, which could not have been brought in through a mere amendment,” the bench had earlier observed while granting interim relief.
The court was particularly critical of the State for invoking bank guarantees without seeking clarification or modification of the interim order. It also took note of the fact that the Goods and Services Tax (GST) regime has since come into force, covering e-commerce transactions comprehensively.
The bench termed the State’s approach a “very sorry state of affairs.” It pointed out that despite the case involving a constitutional challenge and significant revenue, the Advocate General was approached only recently and was not even provided the complete paper book.
The court also noted that no nodal officer was appointed to coordinate with the Advocate General’s office, calling the lapse surprising given the large number of State counsels available.
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Directions and Decision
Taking serious note of the unilateral invocation of bank guarantees, the High Court directed the Deputy Commissioner (Assessment), Sector-13, Lucknow, who authorized the invocation, to file a personal affidavit explaining the circumstances behind the decision.
The Special Secretary, Institutional Finance, Government of Uttar Pradesh, was also directed to submit an affidavit explaining delays in briefing the Advocate General and failure to appoint a nodal officer.
Crucially, the bench ordered that status quo be maintained regarding the tax demand for the financial years 2016–17 and 2017–18 until the next date of hearing.
The matter has been listed for further hearing on January 8, 2026.
Case Title: Instakart Services Pvt. Ltd. vs State of Uttar Pradesh
Case No.: Writ-C No. 29277 of 2016 (with connected matters)
Case Type: Writ Petition (Tax / Constitutional Challenge)
Decision Date: December 1, 2025
