2023 (10) TMI 478 - HC - GST

Tax Credit Dispute Resolved: Petitioner Wins Partial Relief with Account Unblocking and Penalty Retention

K.J. International through its partner Pawan Kumar Versus State of Punjab and another

HC allowed petitioner's writ challenging tax credit blockage. Court directed unblocking of petitioner's account while retaining 10% of assessed penalty ... Blocking of Input Tax Credit - HELD THAT:- The petitioner has remedy of filing an appeal after the adjudicating order is passed and even if he is required to file an appeal, he is to deposit only 10% of the penalty amount assessed. Hence, in this backdrop, the account of the petitioner cannot be blocked beyond 10% of the penalty amount assessed. The present writ petition is allowed and orders dated 10.08.2023 and 25.08.2023 (Annexures P-3 and P-4) are being set aside and the account of the petitioner be unblocked forthwith after retaining 10% of the penalty amount assessed which would fulfill the condition of pre-deposit of 10%. Issues Involved:The petitioner seeks quashing of orders blocking Input Tax Credit and unblocking the same.Summary:The petitioner sought the quashing of orders dated 10.08.2023 and 25.08.2023, where respondent No. 2 had blocked Input Tax Credit amounting to Rs. 55,89,654/- and Rs. 56,18,263/- respectively. The petitioner also requested the court to direct respondent No. 2 to unblock Input Tax Credit amounting to Rs. 1,12,07,917/-.The learned counsel for the petitioner argued that the respondent had blocked the Input Tax Credit of the petitioner through the aforementioned orders.The State's counsel informed that show cause notices had been issued after the orders were passed, and the matter was pending before the adjudicating authority. As per Rule 86A of CGST Rules, 2017, Input Tax Credit can be blocked for one year.The petitioner's counsel highlighted that the show cause notices were issued based on the scrutiny of 8 suppliers mentioned in the notices, without any investigation into the petitioner. It was emphasized that if the Input Tax Credit remained blocked, the petitioner would face difficulties in filing returns and could risk registration cancellation.The primary prayer of the petitioner was to quash the orders blocking the Input Tax Credit. The petitioner was reminded of the option to file an appeal after the adjudicating order, with a requirement to deposit only 10% of the penalty amount assessed. Therefore, it was argued that the petitioner's account should not be blocked beyond 10% of the penalty amount assessed.In conclusion, the writ petition was allowed, and the orders blocking the Input Tax Credit were set aside. The court directed the unblocking of the petitioner's account after retaining 10% of the penalty amount assessed, fulfilling the pre-deposit condition.