2022 (7) TMI 708 - HC - GST

Tax Authority Wrongfully Blocked Electronic Credit Ledger Despite Pending Appeal and 10% Deposit Under Rule 86A

The HC quashed an order blocking the petitioner's Electronic Credit Ledger under Rule 86A of CGST/UPGST Rules. The Assistant Commissioner had blocked the ... Blocking of electronic credit ledger in respect of reversed Input Tax Credit (ITC), interest and penalty amounting to as determined by the order under Section 74(9) of CGST/UPGST Act - HELD THAT:- As per Circular of the Commissioner, Commercial Tax Uttar Pradesh, (GST Section), Lucknow dated 23.11.2021, the power to take action under Rule 86A of the Rules has been conferred upon the Deputy Commissioner/Assistant Commissioner as per their jurisdiction not exceeding Rs. 1 Crore, the Joint Commissioner (Executive)/Joint Commissioner (Corporate Circle) as per their jurisdiction above Rs. 1 Crore but not exceeding Rs. 5 Crore and the Additional Commissioner Grade- I has jurisdiction above Rs. 5 Crore. The impugned order has been passed by the respondent no.3 i.e. Assistant Commissioner, Commercial Tax Department, Sector- 1, Kanpur, who, in view of the aforesaid Circular dated 23.11.2021; is not authorized officer. That apart the attempt of the respondent no.3 to pass the impugned order dated 04.04.2022 is to defeat the provision of Section 107 (6)/(7) of CGST/UPGST Act. Thus, prima facie the impugned order appears to be not only arbitrary, illegal, but also without authority of law and abuse of the process of law. Put up as a fresh case before the appropriate bench on 12.07.2022. Issues:Impugned order blocking Electronic Credit Ledger under Rule 86A of CGST/UPGST Rules - Jurisdictional authority of Assistant Commissioner - Compliance with Section 107 of CGST/UPGST Act - Legality and arbitrariness of impugned order - Prima facie abuse of process of law.Analysis:The judgment by the Allahabad High Court deals with the impugned order passed by the Assistant Commissioner of the Commercial Tax Department, Sector-1, Kanpur, blocking the Electronic Credit Ledger of the petitioner under Rule 86A of the CGST/UPGST Rules. The order was issued based on an earlier order under Section 74(9) of the Act, creating a demand of Rs. 2,54,13,422.50 by reversing Input Tax Credit (ITC), imposing interest, and penalty. The petitioner had appealed against the order under Section 107 of the CGST/UPGST Act and had deposited 10% of the disputed amount, which stayed the balance amount as per the provisions of the Act.Despite the petitioner's compliance with the appeal process and deposit requirements, the Assistant Commissioner blocked the Electronic Credit Ledger, leading to the petitioner's application for unlocking being rejected. The Court noted that the Assistant Commissioner was not the authorized officer as per the Circular of the Commissioner, Commercial Tax Uttar Pradesh, Lucknow, dated 23.11.2021, which specified the jurisdictional limits for taking action under Rule 86A. The Court observed that the impugned order seemed to be arbitrary, illegal, without authority of law, and an abuse of the process of law, aiming to defeat the provisions of Section 107(6)/(7) of the Act.Consequently, the Court directed the respondents to file their counter affidavits within three days, emphasizing that failure to do so would require the concerned respondent to be personally present before the Court to show cause. The respondents were also directed to explain why exemplary costs should not be imposed on them for the arbitrary exercise of power, abuse of the process of law, and harassment of the petitioner. The case was scheduled to be heard before an appropriate bench on 12.07.2022 for further proceedings and considerations.