High Court Upholds Petitioner Challenge on Input Tax Credit Blocking | Procedural Fairness in Tax Matters

The High Court acknowledged the petitioner's challenge against the blocking of input tax credit without due process under Rule-86A of CGST Rules. Citing a relevant precedent, the court issued a notice returnable on 30th September 2021 and allowed alternative modes of service, emphasizing procedural fairness in tax credit matters. The decision reflects a commitment to a transparent legal process, supporting the petitioner's argument and contesting the actions of the respondent authorities.

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Issues:
Challenge to the action of blocking input tax credit without hearing or order under Rule-86A of CGST Rules.

Analysis:
The judgment pertains to a petition challenging the respondent authorities' decision to block the petitioner's input tax credit without providing any opportunity for a hearing or issuing an order, amounting to Rs. 33,99,789. The petitioner contests that under Rule-86A of the Central Goods and Service Tax Rules, 2017, such power cannot be exercised without due process. The petitioner argues that as per sub-rule 3 of Rule 86A, the restrictions on credit should cease after one year, and multiple representations were made to release the credit, with the latest one submitted on 29th July 2021.

The petitioner's counsel cited a decision from the Uttarakhand High Court involving M/s. Vimal Petrothin Private Limited Vs. Commissioner, CGST and others, reported in 2021 (7) TMI 127, to support their case. The High Court, comprising Honourable Ms. Justice Sonia Gokani and Honourable Mr. Justice Rajendra M. Sareen, heard the arguments presented by Mr. Trivedi, the petitioner's advocate. The court acknowledged the petitioner's contentions and issued a notice returnable on 30th September 2021. Furthermore, the court granted permission for the petitioner to serve the respondents through R.P.A.D. in addition to the regular mode of service, allowing direct service as well.

This judgment reflects the court's recognition of the petitioner's challenge against the blocking of input tax credit without following due process, highlighting the importance of procedural fairness in matters concerning tax credit under the CGST Rules. The reference to a relevant precedent from another High Court strengthens the petitioner's argument, indicating a legal basis for contesting the actions of the respondent authorities. The court's decision to issue notice and permit alternative modes of service demonstrates a commitment to ensuring a fair and transparent legal process in resolving the dispute raised by the petitioner.

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