Jurisprudence on Blocking of Electronic Credit Ledger

Jurisprudence on Blocking of ITC- Writ is Maintainable, Test of Reasonableness, May construed as Must, Reasons to Believe, Subjective Satisfaction, Prior Recording of Reasons, Independent Application of Mind, Specify the amount, Hearing to be Granted within 2 Weeks Post Blocking.

Bombay High Court in DEE VEE PROJECTS LTD. VERSUS THE GOVERNMENT OF MAHARASHTRA, DEPARTMENT OF GOODS AND SERVICES TAX THROUGH OFFICE OF THE DEPUTY COMMISSIONER STATE TAX, NAGPUR, UNION OF INDIA, THROUGH SECRETARY FINANCE, ADDITIONAL DIRECTOR, DGGI, NZU, NAGPUR, JOINT COMMISSIONER OF STATE TAX, NAGPUR [2022 (2) TMI 569 - BOMBAY HIGH COURT]

Allegation for Blocking ITC

Petitioner company was not in existence at the address shown in the registration certificate during the said period and, therefore, availment of the credit in the ECL account by the petitioner was fraudulent.

Hon’ble Court Observations

1. Rule 86A is drastic and all procedures to be complied
2. No Resolution is available to Petitioner u/s 107 as Blocking of ITC is not an decision or order by adjudicating authority, hence Writ is maintainable.
3. Power of Blocking ITC can be exercised by an officer authorized by Commissioner and hence such power can be delegated to rank of Assistant Commissioner
4. ITC has been availed either fraudulently or wrongly before taking action of Blocking the ITC
5. Power under Rule 86A is distinct from power under Section 83
6. Blocking of ITC is an administrative power having quasi-judicial shades and must pass test of reasonableness.
7. The use of the word “may” in Rule 86A to be construed as “must”
8. Blocking of ITC not be made on flights of ones fancies or whims or imagination.
9. While Blocking the ITC, the Proper Officer has to be satisfied independently and not be felt compelled to obey the orders of superior authority
10. Subjective Satisfactions must have to be arrived
11. Reasons to Believe for Blocking of ITC must be formed on basis of Objective Material
12. Reasons to be recorded before Blocking the ITC
13. Order Blocking the ITC must specify the amount of ITC fraudulently or wrongly availed and not the entire amount available.
14. Hearing to be granted within a period of 2 weeks of Block of ITC being the Reasonable time
15. Rule 86-A has been adequately framed by the rule making authority so as to take care of any possible misuse of the power.