Court Orders Review of Blocked Input Tax Credit & Procedural Fairness in GST Registration

The High Court noted the withdrawal of the show-cause notice for cancellation of the petitioner's GST registration. However, the court acknowledged the blocking of the petitioner's Input Tax Credit (ITC) without notice, hearing, or reasons. The court directed the respondents to examine the blocked ITC balance of Rs. 58,16,444.00 and unblock it if unjustified within four working days. Respondents were given ten days to justify the blocking if valid reasons existed. The next hearing was scheduled for October 15, 2019, emphasizing procedural fairness and adherence to legal requirements in administrative actions related to GST registration and ITC.

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Issues:
1. Impugned show-cause notice for cancellation of GST registration withdrawn.
2. Blocking of Input Tax Credit (ITC) without notice, hearing, or reasons.

Analysis:
1. The High Court noted that the show-cause notice issued by the respondents for cancellation of the petitioner's GST registration had been withdrawn after considering the petitioner's reply. The counsel for the petitioner highlighted that although the cancellation notice had been withdrawn, the respondents had blocked the petitioner's ITC without any show-cause notice, hearing, or reasons provided. The petitioner presented evidence of the blocked credit balance amounting to Rs. 58,16,444.00 from the respondents' portal. The court acknowledged this issue and directed the respondents to examine the petitioner's grievance regarding the blocked ITC balance and to unblock it if found unjustified. The court set a deadline of four working days for a positive decision on unblocking the ITC, with a provision for the respondents to justify the blocking if they had valid reasons, requiring a reply within ten days.

2. The court issued notice to the respondents, who accepted it through their counsels. The respondents were directed to promptly review the petitioner's complaint and take necessary action to unblock the ITC balance if the blocking was deemed unjustified. However, if the respondents had valid reasons for the blocking, they were instructed to provide a detailed reply within ten days, with a copy to the petitioner's counsel. The court scheduled the next hearing for October 15, 2019, and ordered the issuance of necessary documents under the signatures of the Court Master for compliance with the directions provided in the judgment. The detailed examination of the issues related to the withdrawal of the cancellation notice and the blocking of the petitioner's ITC highlighted the importance of procedural fairness and adherence to legal requirements in administrative actions concerning GST registration and ITC matters.

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