Input tax credit blocking under State GST upheld where Deputy Commissioner acted within Rule 86A and central circular did not apply.

Rule 86A(1) of the OGST Rules, 2017 permits blocking of input tax credit by the Commissioner or an authorised officer not below Assistant Commissioner rank, so an order passed by a Deputy Commissioner was treated as within competence. A Central Government circular dated 02.11.2021 was held not to govern State GST proceedings unless adopted by the State Government, and no such adoption was shown. The natural justice objection was also rejected in light of prior decisions on similar State GST credit-blocking action. The blocking of input tax credit was therefore sustained.

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Issues: (i) Whether the Deputy Commissioner of State Tax had jurisdiction to pass the orders blocking input tax credit under Rule 86A(1) of the OGST Rules, 2017; (ii) Whether the Central Government circular dated 02.11.2021 could be relied upon to challenge the impugned orders in a State GST matter and whether the orders were vitiated for breach of natural justice.

Issue (i): Whether the Deputy Commissioner of State Tax had jurisdiction to pass the orders blocking input tax credit under Rule 86A(1) of the OGST Rules, 2017.

Analysis: Rule 86A(1) authorises the Commissioner or an officer authorised by him, not below the rank of Assistant Commissioner, to pass an order where input tax credit is believed to have been fraudulently availed or is otherwise ineligible. The impugned orders were passed by the Deputy Commissioner, who is higher in rank than an Assistant Commissioner. On that basis, the authority exercised was within the statutory framework governing State GST.

Conclusion: The challenge to jurisdiction failed and the orders were held to be within competence.

Issue (ii): Whether the Central Government circular dated 02.11.2021 could be relied upon to challenge the impugned orders in a State GST matter and whether the orders were vitiated for breach of natural justice.

Analysis: The circular relied upon was addressed to Central Tax officers and was treated as applicable to Central GST, not State GST, unless adopted by the State Government. No material was produced to show such adoption. The plea based on natural justice was also treated as settled against the petitioner by prior decisions dealing with similar blocking of credit under the State GST regime.

Conclusion: The circular did not assist the petitioner, and the objection based on natural justice was rejected.

Final Conclusion: The writ petition failed on both the jurisdictional and procedural challenges, and the impugned blocking of input tax credit was sustained.

Ratio Decidendi: Under Rule 86A(1) of the OGST Rules, 2017, a Deputy Commissioner is competent to pass a blocking order as an officer higher than Assistant Commissioner, and a Central GST circular does not govern State GST unless adopted by the State Government.

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