Input tax credit blocking under GST requires valid delegation, but objection rejection must follow a fair hearing and reasoned reconsideration.

State tax officers were treated as competent to invoke Rule 86-A to block input tax credit because the Central and State GST enactments were read as a parallel, harmonious scheme and the delegation framework authorised such exercise of power. However, the rejection of the taxpayer's objection to the blocking action could not stand where it did not fairly address the merits or comply with the hearing and reconsideration contemplated by the blocking order and Rule 86-A(2). The rejection order was quashed and the matter remitted for fresh consideration after hearing the taxpayer.

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Issues: (i) Whether a State Tax Officer could exercise power under Rule 86-A of the Central Goods and Services Tax Rules, 2017 for blocking input tax credit; (ii) Whether the order rejecting the petitioner's objection to the blocking of input tax credit could be sustained without a proper hearing and reasoned consideration.

Issue (i): Whether a State Tax Officer could exercise power under Rule 86-A of the Central Goods and Services Tax Rules, 2017 for blocking input tax credit.

Analysis: The statutory scheme of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 was read as a parallel and harmonious framework. Section 6 of the Central Goods and Services Tax Act, 2017 authorises officers appointed under the State tax law to act as proper officers under the Central law, subject to the statutory conditions, while Section 5 of the Maharashtra Goods and Services Tax Act, 2017 permits delegation of powers to State tax officers. Rule 86-A of the Central and State Rules was treated as pari materia, and the delegation order issued by the Commissioner of State Tax supported the exercise of power by the State Tax Officer.

Conclusion: The challenge to jurisdiction failed and the State Tax Officer was held competent to act under the impugned framework.

Issue (ii): Whether the order rejecting the petitioner's objection to the blocking of input tax credit could be sustained without a proper hearing and reasoned consideration.

Analysis: The impugned blocking order itself contemplated a representation and reconsideration, and Rule 86-A(2) of the relevant Rules required satisfaction before continuation of the restriction. The subsequent rejection of objections did not deal with the petitioner's merits and was found inconsistent with the procedure promised in the blocking order and with the statutory opportunity inherent in the rule. The petitioner was entitled to a hearing and a fresh reasoned decision.

Conclusion: The order rejecting the objection was quashed and the matter was remitted to the State Tax Officer for fresh consideration after hearing the petitioner.

Final Conclusion: The petition succeeded only to the extent of setting aside the rejection order and directing reconsideration, while the jurisdictional challenge to the State Tax Officer's authority was rejected.

Ratio Decidendi: State tax officers can act as proper officers under the Central GST regime where the Central and State GST enactments operate in pari materia and the statutory delegation framework authorises such exercise of power, but any restriction on input tax credit must still be reconsidered through a fair hearing and a reasoned order before it is continued.

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