Electronic Credit Ledger Block Lifted: Authorities Must Issue Show Cause Notice and Restore Business Registration Promptly

HC allowed appeal challenging electronic credit ledger blocking. Court found suspension of registration without show cause notice improper. Directed authorities to restrict credit ledger blockage, issue show cause notice, and restore appellant's registration. Ordered prompt proceedings conclusion after appellant's response, enabling business operations to resume.

---

---

Issues:
Challenge to order declining interim relief due to blocking of electronic credit ledger leading to negative balance. Allegations of fraudulent input tax credit availed by the appellant. Suspension of registration due to non-filing of return without issuance of show cause notice.

Analysis:
The appellant filed an intra-Court appeal challenging the order declining interim relief regarding the blocking of the electronic credit ledger, resulting in a negative balance. The appellant contended that the reasons given by the authorities for blocking the ledger were untenable and factually incorrect. The dispute arose from disallowance of input tax credit during December 2017 to January 2018, based on transactions with a non-existing party at the declared place of business. This led to a blockage of input tax credit amounting to Rs.71,23836.66 each under Central Goods and Services Tax/West Bengal Goods and Services Tax. The appellant's business activities were severely impacted due to the pending finalization of the ledger blocking proceedings by the authorities.

The Court considered the identical issues raised in the writ petition and the appeal, consolidating both for disposal. The allegations pertained to transactions in the financial year 2017-2018, with a notice disallowing the claimed input tax credit. The Court noted that the appellant's business had come to a standstill due to the blockage of the ledger, especially since the remaining credit available was insufficient. The authorities were directed to conclude the proceedings promptly after the appellant's response. The Court found the suspension of registration for non-filing of returns as a drastic step without issuing a show cause notice.

In the final judgment, the Court directed the authority to restrict the blockage of electronic ledger credit to the specified amount under CGST/SGST head and issue a show cause notice to the appellant within ten days. The appellant was granted an opportunity to respond, followed by a personal hearing before a final order. The authorities were instructed to lift the blockage beyond the specified amount and restore the appellant's registration under the relevant Act to enable return filing. The related matters were disposed of accordingly for compliance with the Court's directives.

---