2024 (1) TMI 661 - HC - GST

Tax Authorities Ordered to Provide Fair Hearing and Review ITC Blocking Order with Proper Documentation Submission

HC found that tax authorities failed to provide reasonable opportunity to the petitioner regarding ITC blocking. The court quashed the order and remanded ... Reasonable opportunity of hearing - personal hearing before adverse order - quashing and remand for fresh consideration - blocking and reversal of Input Tax Credit under Rule 86-AReasonable opportunity of hearing - personal hearing before adverse order - blocking and reversal of Input Tax Credit under Rule 86-A - Whether the impugned order directing reversal of Input Tax Credit could be sustained where the show cause notice allegedly providing only two hours' notice was received on the date fixed for personal hearing, and whether the order required quashing and remand for fresh consideration - HELD THAT: - The Court found that the show cause notice dated 09.10.2023 was asserted by the petitioner to have been served by e-mail on 25.10.2023 with a hearing fixed two hours later, and that consequently a reasonable opportunity was not afforded to submit documents or to explain facts before an order directing reversal of ITC was passed. Although the respondent contended that the notice had been sent by registered post with acknowledgment due, the Court concluded on these facts that the impugned order could not stand for want of a reasonable opportunity. The Court did not decide the merits of the claim to ITC or the correctness of the substantive action under Rule 86-A, but quashed the order and remanded the matter for reconsideration, directing that the petitioner be given a personal hearing after supplying relevant documents and that the respondent pass a reasoned order within a stipulated time-frame. [Paras 3, 4]Impugned order dated 30.10.2023 quashed; matter remanded for fresh consideration after providing a reasonable opportunity including a personal hearing and on receipt of documents, with a direction to decide the matter by a reasoned order within four weeks.Final Conclusion: Writ petition allowed in part: the order reversing Input Tax Credit is quashed on the ground that the petitioner was not afforded a reasonable opportunity; the matter is remanded for fresh consideration after personal hearing and receipt of documents, to be decided by a reasoned order within the time directed. Issues involved:The issues involved in the judgment are regarding the blocking of Input Tax Credit (ITC) under Rule 86-A of the TNGST / CGST Rules, 2017, lack of reasonable opportunity provided to the petitioner to submit relevant documents and explain the facts, and the direction to reverse ITC of a substantial value without proper opportunity for the petitioner to defend.Blocking of Input Tax Credit (ITC):The petitioner, a registered person under the current GST regime, faced an order proposing to block their ITC in relation to purchases made from M/s. Quality Traders. The ground for this action was that Quality Traders were deemed to be non-existent or bill traders. In response, the petitioner issued a reply to the initial notice. Subsequently, a show cause notice was issued fixing a personal hearing on the same day it was served via email, providing insufficient time for the petitioner to adequately respond. This led to the filing of the writ petition challenging the lack of a reasonable opportunity for the petitioner to present their case.Reasonable Opportunity and Interference:The respondent argued that a show cause notice was sent to the petitioner via registered post, claiming that a reasonable opportunity was indeed provided. However, the petitioner contended that the notice was received on the day of the hearing, limiting their ability to submit necessary documents and explanations. The court, without delving into the merits of the case, acknowledged that the lack of adequate opportunity warranted interference with the impugned order directing the reversal of ITC.Judgment and Remand:The court allowed the writ petition by quashing the order dated 30.10.2023 and remanding the matter for reconsideration. The respondent was instructed to afford the petitioner a reasonable opportunity, including a personal hearing, and to issue a reasoned order after the petitioner submits all relevant documents by 24.01.2024. A deadline of four weeks from the receipt of documents was set for issuing the reasoned order. No costs were awarded, and related motions were closed as a consequence of the judgment.