Conditional quashing of ineligible input tax credit assessment led to unblocking of the credit ledger and fresh adjudication.

An assessment order confirming tax, interest and penalty for alleged ineligible input tax credit was conditionally quashed where the taxpayer had not given an effective reply to the show cause notice, but claimed genuine purchases and sought an opportunity to substantiate them. The alleged credit related to invoices said to have been issued by a non-existent dealer, and the electronic credit ledger had been blocked under Rule 86-A of the Tamil Nadu GST Rules. The court set aside the order subject to compliance, directed unblocking of the credit ledger on fulfilment of conditions, and remitted the matter for fresh consideration on merits after a comprehensive reply and cash deposit.

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Issues: Whether the impugned assessment order confirming tax, interest and penalty for alleged ineligible input tax credit deserved to be quashed, and whether the consequential blocking of the electronic credit ledger under Rule 86-A of the Tamil Nadu Goods and Services Tax Rules, 2017 could be lifted subject to compliance.

Analysis: The petitioner had not filed an effective detailed reply to the show cause notice and the disputed demand arose from alleged availment of ineligible input tax credit on invoices said to have been issued by a non-existent dealer. At the same time, the petitioner sought an opportunity to substantiate genuine purchases and expressed willingness to cooperate. Balancing the prejudice caused by the impugned order with the need for proper adjudication, the order was set aside conditionally, with liberty to the respondents to proceed afresh after receipt of a comprehensive reply and the stipulated cash deposit.

Conclusion: The impugned order was quashed conditionally, the blocked credit was directed to be unblocked upon compliance, and the matter was remitted for fresh consideration on merits.

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