2022 (8) TMI 54 - HC - GST

Negative blocking of electronic credit ledger without hearing breaches natural justice; officer must reconsider reply and decide expeditiously

HC held that negative blocking of the electronic credit ledger during pending adjudication violated principles of natural justice because it was imposed ... Negative blocking of Electronic Credit Ledger - Input Tax Credit (ITC) - adjudication proceedings - opportunity of hearing - reasoned and speaking order - expeditious disposal of replyNegative blocking of Electronic Credit Ledger - adjudication proceedings - reasoned and speaking order - opportunity of hearing - expeditious disposal of reply - Directing the Officer to consider and dispose of the petitioner's reply to the show-cause notice and to determine the continued negative blocking of ITC in accordance with law - HELD THAT: - The Court noted that the respondents had issued a show-cause notice and that the petitioner filed a reply on 13th June, 2022 after seeking extensions. Although the petitioner was not wholly diligent in filing the reply, the Court directed that the reply must be considered and disposed of expeditiously. The Officer is required to provide the petitioner or his authorised representative an opportunity of hearing, to pass a reasoned and speaking order in accordance with law, and to take immediate steps to revoke the negative blocking of the Electronic Credit Ledger if, on such consideration and hearing, the petitioner establishes a case for revocation. The Court fixed a preferred timeline of three weeks from communication of the order for disposal of the reply, emphasising prompt adjudication and adherence to procedural fairness.The Officer concerned is directed to consider and dispose of the reply dated 13th June, 2022 expeditiously, provide an opportunity of hearing, pass a reasoned and speaking order, and, if the petitioner succeeds, revoke the negative blocking of ITC; disposal preferably within three weeks of communication of this order.Final Conclusion: Writ petition disposed by directing the assessing authority to promptly consider the petitioner's reply to the show-cause notice, afford hearing, pass a reasoned speaking order and, if justified, revoke the negative blocking of the Electronic Credit Ledger, preferably within three weeks of communication of the order. Issues involved:Challenge to negative blocking of Electronic Credit Ledger during pendency of adjudication proceedings.Analysis:The High Court of Calcutta, in the judgment, addressed the challenge brought by the petitioner against the GST Authority's negative blocking of the Electronic Credit Ledger during ongoing adjudication proceedings. The Court noted that the petitioner had been issued a show-cause notice on 20th January, 2022, with a deadline for response by 4th February, 2022. The petitioner requested an extension of two weeks to reply to the notice, which was granted. However, the petitioner took nearly five months to respond, leading to the negative blocking of the Input Tax Credit (ITC) by the respondents.The petitioner argued that the blocking of ITC was unjustified as his reply to the show-cause notice had not been disposed of before the action was taken. The Court considered the delay in the petitioner's response and the circumstances of the case. The judgment, in Writ Petition WPA 9820 of 2022, directed the concerned Officer to promptly review and decide on the petitioner's reply submitted on 13th June, 2022, to the show-cause notice. The Officer was instructed to provide a reasoned order within three weeks of the judgment, ensuring the petitioner or their representative is given an opportunity to be heard. If during the hearing, the petitioner establishes grounds for revoking the negative blocking of ITC, the Officer was mandated to take immediate steps to lift the block.In conclusion, the judgment emphasized the importance of timely responses to show-cause notices and the need for authorities to act judiciously in such matters. The Court's directive aimed to ensure a fair and expeditious resolution of the dispute regarding the negative blocking of the Electronic Credit Ledger, safeguarding the petitioner's right to be heard and seeking a reasoned decision based on the facts presented during the adjudication process.