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 without disposing of the reply to the show-cause notice. The petition was disposed by directing the concerned officer to consider the reply filed on 13 June 2022 and to decide the matter expeditiously, preferably within three weeks, by a reasoned, speaking order after affording an opportunity of hearing. If the petitioner establishes grounds for revocation, the officer must immediately revoke the blocking.

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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.

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