TaxTMI 
TaxTMI 
2022 (3) TMI 908
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.... 1.1 All that we need to do is to erase the expression "provisions of the Income Tax Act" and replace the same with the expression "provisions of the Goods and Services Tax Act, 2017". 2. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs: "(a) That this Hon'ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari, or any other appropriate Writ, Order or direction, calling for the papers and proceedings leading to the records relating to blocking of Input Tax Credit of the Petitioner to the tune of Rs. 97,17,290/ (Rupees Ninety Seven Lakhs Seventeen Thousand Two Hundred and Ninety Only) and after looking into the same and the legality thereof, this Hon'ble Court be pleased to quash and set aside the action of Respondent No.3 regarding blocking of Input Tax Credit of the Petitioner which has been shown on the login credential of GSTN portal of the Petitioner (Annexure-E); (b) That this Hon'ble Court be pleased to issue a Writ of Mandamus, or a Writ in the nature of Mandamus, or any other appropriate writ Order or direction to the Responde....
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....ected of the respondent no.3 to atleast convey the reasons, if not in details atleast in brief, for blocking the ITC under Rule 86A of the Rules. Mr. Modh would submit that without any reasons how would a dealer come to know as to why his ITC has been blocked. He would submit that all the transactions of his client with M/s. Anmol Enterprise are clean. If there is any information or material with the department to doubt the credentials of M/s. Anmol Enterprise then for such reason alone, the ITC of the writ applicant could not have been blocked. In other words, what Mr. Modh is trying to convey is that his client is a bona fide purchaser of the goods. The goods were delivered in accordance with law. In such circumstances referred to above, Mr. Modh prays that there being merit in his writ application, the same be allowed and the impugned order/action on the part of the respondent no.3 in blocking the ITC be quashed and set aside. 5. On the other hand, this writ application has been vehemently opposed by Mr. Utkarsh Sharma, the learned AGP appearing for the respondents. Mr. Sharma would submit that having regard to the satisfaction arrived at by the authority based on some inform....
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.... Act ITC Wrongly Availed Interest Penalty 1 CGST/SGST 9717290 @24% @15% The grounds and quantification are given below: Based on information available with this office your supplier Anmol Enterprise has not conducted any business from any place for any period during which registration has been obtained and found a FAKE/BOGUS UNIT. Therefore, your firm does not satisfies the conditions u/s 16 of CGST/SGST Act and uses of ITC under rule 86(A)(1). You are hereby advised to pay the amount of tax as ascertained above along with the amount of applicable interest and penalty under section 74(5) within thirty (30) days failing which Show-cause Notice will be issued under section 74(1). In case you wish to file any submissions against the above ascertainment, the same may be furnished within thirty (30) days in Part B of this form. Sd/- Assistant Commissioner of State Tax, Unit - 62, Surat." 7. Mr. Sharma would submit that the inquiry is in progress. He fairly conceded that although 7 months have elapsed, since the ITC came to be blocked yet, no show cause notice has been issued till this date under Section 73 or 74 respect....
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.... ii. without receipt of goods or services or both; or b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. (2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit. (3) Such restriction shall cease to have effect after the expiry ....
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....eceived in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment: Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take....
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....astic powers upon the proper officers if they have reason to believe that the activities or invoices are suspicious. The Rule 86A is based on "reason to believe". "Reason to believe" must have a rational connection with or relevant bearing on the formation of the belief. It is a subjective term and can be interpreted differently by different individuals. Prima facie, it appears that the Rule 86A does not even contemplate for issue of any show-cause notice or intimation notice. In such circumstances, the person affected may be taken by surprise when he would go to the portal to pay taxes and finds that his ITC is not usable. 13. This very Bench in one of its recent pronouncements in the case of Samay Alloys India Pvt. Ltd. Vs. State of Gujarat, (Special Civil Application No.18059 of 2021) decided on 03.02.2022 had the occasion to consider the scope of Rule 86A more particularly, in a case wherein the balance in the electronic credit ledger is NIL. In Samay Alloys India Pvt. Ltd. (Supra), this Court took the view that the Rule 86A is not the Rule which entitles the proper Officer to make debit entries in the electronic credit ledger of the registered person. The Rule merely allows....
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.... Any administrative power having quasi-judicial shades, which brings civil consequences for a person against whom it is exercised, must answer the test of reasonableness. It would mean that the power must be exercised fairly and reasonably by following the principles of natural justice. 16. In the case of Maneka Gandhi Vs. Union of India : AIR 1978 SC 597 , it was held that the principle of reasonableness which legally as well as philosophically, is an essential element of equity or non-arbitrariness and it pervades Article 14 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14. Fair and reasonable exercise of power would be there only when the power is exercised in the manner prescribed in the provision of law conferring the power and for the purpose for achievement of which it exists. This would underline the importance of existence of reasons to believe that there is fraudulent or erroneous availment of credit standing in the ECL. In other words, the power under rule 86-A cannot be exercised unless there is a subjective satisfaction made on the basis of objective material....
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....ond two weeks from the date of the order blocking the ECL. After such hearing is granted, the authority may proceed to confirm the order for such period as may be permissible under the rule or revoke the order, as the case may be. 18. The second pre-requisite of rule 86-A is of recording of reasons in writing. It comes with the use of the word "may", which, in our opinion, needs to be construed as conveying an imperative command of the rule maker, and that means, reasons must be recorded in writing in each and every case. This is because of the fact that any order which brings to bear adverse consequences upon the person against whom the order is passed, must disclose the reasons for it so that the person affected thereby would know why he is being made to suffer or otherwise he would not be able to seek appropriate redressal of his grievance arising from such an order. Right to know the reasons behind an administrative order having civil consequences is a well embedded principle forming part of doctrine of fair play which runs like a thread through the warp and weft of the fabric of our Constitutional order made up by Articles 14 and 21 of the Constitution of India. In the case....
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....wing Electronic Credit ledger details from 21/07/2021 to 01/09/2021 Sr. No Date Reference No. Tax Period, if any Description Transaction Type (Debit/Credit) Credit/Debit (Rs.) Integrated tax (Rs.) Central tax State Tax Cess Total 1 - - - Opening Balance - - - - - - 2 28/07/2021 BL24072 10000154 Jul-21 Blocked Debit 1.00 48,58,644 .00 48,58,645 .00 0.00 97,17,290 3 - - - Closing Balance - - - - - - 23. The aforesaid order is bereft of any reasons and therefore, there is no question of any reflection therein of the authority passing the order on being satisfied about the necessity of passing it. When the first requirement of Rule 86A is of, "having reasons to believe" and it has manifestly been not followed, the impugned order would have to be treated as erroneous in law. The second requirement regarding recording of reasons in writing is also followed in breach. In such circumstances, it can be said that the case on hand is one of an arbitrary exercise of power under Rule 86A. 24. Before we close this judgment, we must observe something as rega....
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....who will not deposit the tax collected by him from such purchasing dealers to the Government, and therefore avoid transacting with such selling dealers. The Delhi High Court read down the concerned provision to not include a buyer who has bona fide entered into the purchase transactions with validly registered dealers who have issued the tax invoices against the transaction. The Court explained that such provision, if not read down, is violative of Article 14 of the Constitution for being inherently arbitrary. The only case when such provision applies is if the tax authorities come across some material to show that the purchasing dealer and the selling dealer, acted in collusion in detriment to the exchequer. However, in the event that the selling dealer has failed to deposit the tax collected, the remedy for the authorities is to proceed against the defaulting selling dealer to recover such tax and not to deny the purchasing dealer his input. The Supreme Court affirmed the said case and dismissed the Revenue's petition seeking special leave to appeal against this decision. 24.5 In Sri Vinayaga Agencies v. Assistant Commissioner, W.P. Nos. 2036 to 2038 of 2013, dated 29.01.2013 ....