2022 (9) TMI 1149 - HC - GST

Tax Credit Dispute Resolved: Authorities to Review Blocking of Input Tax Claims Under Rule 86A with Fair Hearing Commitment

The HC addressed a dispute over blocking Input Tax Credit under Rule 86A of CGST Act. After court intervention, respondents partially unblocked the credit ... Unblocking of Input Tax Credit - opportunity of hearing to the petitioner not provided - negative blocking in the nature of futuristic action - HELD THAT:- The process of hearing of the petitioner and consideration the case of the petitioner and documents produced by the petitioner, is underway before the authorities - It is expected that in the above process already initiated by the authorities of hearing the petitioner to consider the petitioner’s case in respect of the grievance of the blocking of the part of the Input Tax Credit, the authorities shall arrive at an appropriate decision in accordance with law expeditiously after considering the facts of the case and defence of the petitioner fully. It goes without saying that the such decision with regard to the unblocking of the remainder Input Tax Credit shall be taken by the authorities without being influenced by the earlier communication as well as the grounds raised. This petition is disposed of. Issues:Blocking of Input Tax Credit under Rule 86A of the Central Goods and Service Tax Act, 2017 without opportunity of hearing and justification.Analysis:The petitioner, a small scale unit engaged in manufacturing Master Batch colouring material for plastic, faced a grievance regarding the blocking of Input Tax Credit amounting to Rs. 44,74,080 in their electronic credit ledger by the authorities. The petitioner sought to set aside the decision reflected in a letter dated 11.1.2022 and requested the unblocking of the Input Tax Credit. The blocking was done under Rule 86A of the CGST Act, 2017, without providing an opportunity of hearing to the petitioner. The petitioner argued that the blocking was unjustified and amounted to negative blocking without due process. Reference was made to previous court decisions in similar matters, emphasizing the need for a fair hearing in such cases.After the issuance of Notice by the court, the petitioner submitted an affidavit stating that a portion of the blocked Input Tax Credit, amounting to Rs. 43,71,672, had been unblocked by respondent No.2. However, Rs. 1,02,468 remained blocked without valid reasons or a hearing. The petitioner highlighted the lack of justification for keeping this amount blocked and the absence of any communication or opportunity for a hearing in this regard. The petitioner had also submitted a letter to the authority addressing various concerns related to the matter.Subsequently, respondent No.2 reiterated their earlier stand in a communication dated 24.8.2022 but expressed willingness to consider the documents submitted by the petitioner to support the genuineness of their purchases and duty payments. The authorities called the petitioner for a hearing on 29.8.2022 to review the case and the documents provided. The court expected the authorities to make a decision promptly after fully considering the petitioner's case and defense in accordance with the law.The Assistant Government Pleader assured the court, based on instructions from the relevant officer, that a decision regarding the unblocking of the remaining Input Tax Credit would be made by 30th September, 2022, without being influenced by previous communications or grounds raised. The court, without expressing any opinion on the merits, disposed of the petition with these observations, leaving the final decision to the authorities.