2022 (3) TMI 1473 - HC - Indian Laws

Court quashes communication, allowing fresh proceedings for alleged liability under the Act.

The court quashed the communication dated 13.11.2020, allowing the respondents to initiate fresh proceedings in compliance with the law to determine the ... Blocking of input tax credit - Principles of natural justice - HELD THAT:- If any liability is to be fixed with respect to payment of tax, it has to first start with issuance of a show cause notice under Section 73 or Section 74 of the Act as the case may be. Thereafter, full fledged assessment proceedings are to be undertaken wherein the assessee is given an opportunity of hearing and thereafter, the final order is passed - In the case on hand, it appears that although, the subject matter was unblocking of the ITC credit yet, the final liability has also been fixed. The impugned communication dated 13.11.2020, Annexure – D, Page-25 is set aside, reserving the liberty for the respondents to initiate fresh proceedings in accordance with law so far as the alleged liability of the writ applicants under the Act is concerned - application disposed off. Issues:1. Writ application under Article 226 seeking relief against blocking of input tax credit and tax demand.Analysis:1. The writ applicants, a partnership firm engaged in supplying home appliances, challenged the respondent's actions of blocking input tax credit and issuing a tax demand of Rs.61,47,499.2. During the hearing, the respondent's counsel informed the court that the blocked electronic credit ledger had been unblocked.3. The writ applicants argued that unblocking the credit does not resolve the issue as the letter dated 13.11.2020 constituted a final assessment order without proper assessment proceedings.4. The court acknowledged the validity of the argument, emphasizing that liability determination should follow a show cause notice under Section 73 or 74 of the Act, followed by assessment proceedings with a hearing for the assessee before issuing a final order.5. Consequently, the court quashed the communication dated 13.11.2020, allowing the respondents to initiate fresh proceedings in compliance with the law to determine the alleged liability of the writ applicants under the Act.6. The writ application was disposed of, with direct service permitted for further actions.