TaxTMI 
TaxTMI 
2025 (4) TMI 1467
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....ondent No. 4 to block the Input Tax Credit of the Petitioner to the tune of Rs. 1,18,41,455/- in terms of Rule 86A (1) (a) of the Bihar Goods & Service Tax Rules, 2017 (hereinafter referred as 'BGST Rules, 2017'), and to further take legal action against the Petitioner; (ii) For issuance of appropriate writ/s and/or direction/s upon the Respondent No. 3 & 4 to unblock the Input Tax Credit (hereinafter referred to as "ITC") lying in the Electronic Credit Ledger of the Petitioner amounting to Rs. 1,18,41,455/-; (iii) For a declaration that the arbitrary exercise of power of blocking the electronic credit ledger under Rule 86A of the BGST Rules, 2017 could not have been exercised by the Respondent No. 3 & 4 in the facts of the present case against the Petitioner, inasmuch as there is no independent application of mind and consequently there exists no reason to believe which warrant the Respondent No. 3 and 4 to have invoked the power granted to it under Rule 86A of the BGST Rules, and where under no reasons whatsoever have been provided by the Respondent No. 3 in its Order dated 07.02.2025 for blocking the ITC, and thus the same may be ordered to be vacated; ....
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....pondent no. 4 that after investigation the said entity was found non-existent at the principal place of business. Respondent No. 3 directed respondent no. 4 to take appropriate action against the petitioner who is in the recipient's list of M/s TDML Services Private Limited and had availed the benefit of input tax credit unlawfully. With the writ application the decision of the respondent no. 4 has not been enclosed and it is not specifically under challenge but a direction has been sought for against respondent nos. 3 and 4 to unblock the ITC lying in the Electronic Credit Ledger (hereinafter referred to as the 'ECrL') of the petitioner amounting to Rs. 1,18,42,455/-. Stand of the petitioner 4. Learned counsel for the petitioner has submitted that the order as contained in Annexure-P/2 which is the basis of blocking of credit has been issued by the Additional Commissioner State Taxes, Central Investigation Bureau, Bihar vide Memo No. 198 dated 07.02.2025. 5. It is submitted that the impugned communication (Annexure 'P/2') has been issued by respondent no. 3 and pursuant thereto respondent no. 4 has blocked the ITC to the tune of Rs. 1,18,41,455/-. 6. Learned counsel su....
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....itted that the procedure for disallowing debit of Electronic Credit Ledger and the remedy against the same have been duly provided in the Guidelines. The petitioner has remedy available to make a submissions before the Authorized Officer/Commissioner with material evidence and he may request the authority to examine the matter afresh. It is submitted that on being satisfied that the input tax credit, initially considered to be fraudulently availed or ineligible as per conditions of sub-rule (1) of Rule 86A and the same is not no more ineligible or wrongly availed, either partially or fully, the authority may allow the use of credit. 10. Learned counsel submits that Rule 86A was inserted in CGST/BGST Rules empowering the competent authority to block input tax credit if the authority has reason to believe that input tax credit has been fraudulently availed by the tax payer. 11. In this case, the Joint Commissioner, Anti-Evasion Unit, CGST and Central Excise, Kolkata North Commissionerate had issued a Circular under cover of its letter bearing no. GEXCOMAF/AE/1017/2024-AE-O/o Pr. Cmmr. CGST-Kolkata (N) 830/849 dated 16.01.2025 to the respondent no. 3 informing inter alia that th....
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.... Annexure 'P/2' hereunder for a ready reference:- बिहार सरकार वाणिज्य-कर विभाग (केन्द्रीय अन्वेषण ब्यूरो, कर भवन, द्वितीय तल, वीरचंद पटेल पथ, पटना।) पत्रांक :- अ०ब्यूरो(ITC)-17-38/24(खण्ड-3) 198 (अनु०) / पटना, दिनांक - 07.02.25 प्रेषक, राज्य -कर अपर आयुक्त, केन्द्रीय अन्वेषé....
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....6;दाधिकारियों द्वारा माल एवं सेवा कर अधिनियम, 2017 की धारा 67(2) के तहत प्रतिष्ठान Tdml Services Private Limited, GSTIN: 19AAHCT3493NIZJ के मुख्य व्यवसायिक स्थल (Principal Place of Business-13/12, chinar Park, Clubtown Gateway, Hatiara, New Town, North Twenty Four Parganas, West Bengal, 700157) पर search operation संचालित किया गया। • जाँचोपरान्त उक्त प्रतिष्ठान अपने व्यवसायिक स....
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....7;नियम, 2017 के नियम 86A(1)(a) के तहत ITC block करते हुए तथा नियमानुसार विधिसम्मत कार्रवाई करते हुए फलाफल से अधोहस्ताक्षरी को यथाशीघ्र अवगत कराना सुनिश्चित किया जाय। अनु०-यथोक्त विश्वासभाजन ह० /- राज्य-कर अपर आयुक्त केन्दीय....
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....ired to be denied/disallowed along with applicable interest and penalty as per law...." 19. In the background of the above mentioned materials which came to the notice of the respondent no. 3, the respondent no. 3 has taken an interim decision to block the ITC of the petitioner to the extent of Rs. 1,18,41,455/-. Rule 86A (1) of the CGST/BGST Rules of 2017 reads as under:- "Rule 86-A. Conditions of use of amount available in electronic credit ledger.- (1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as- (a) 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- (i) issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or (ii) without receipt of goods or services or both; or (b) the credit of input tax has been availed on the stren....
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....wer thereunder is exercised. While interpreting the words "must have reasons to believe", the Hon'ble Bombay High Court has recorded in para '33' inter alia as under:- "33. It must be noted that the power under rule 86-A which in effect is the power to block ECL to the extent stated earlier is drastic in nature. It creates a dissability for the tax payer to avail of the credit in ECL for discharge of his tax liability, which he is otherwise entitled to avail. Therefore, all the requirements of rule 86-A would have to be fully complied with before the power thereunder is exercised. When this rule requires arriving at a subjective satisfaction which is evident from the use of words, "must have reasons to believe", the satisfaction must be reached on the basis of some objective material available before the authority. It cannot be made on the flights of ones fancies or whims or imagination. The power under rule 86-A is an administrative power with quasi-judicial hues exhibited in aforestated twin pre-requisites and has civil consequences for a tax payer in the sense, it acts as an obstruction to right of a tax payer to utilise the credit available in his ECL. Any administrati....
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....ell us in the matter. They would, in such a case, require this Court to read into the provisions of rule 86-A something not expressly stated therein, and so, we find that post decisional or remedial hearing would have to be granted to the person affected by blocking of his ECL. We may add that such post decisional hearing may be granted within a reasonable period of time which may not be beyond 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." 24. Regarding pre-requisite of recording of reasons in writing, it is found that in the said case the impugned order was just a two liner and it writes as follows:- "Blocked by Shri/Mr/Ms Vrushali Sukumar Mandape, Deputy Commissioners of State Tax, MIDC-Nagpur-502 Admn. State." 25. In the aforesaid kind of the impugned order, the Hon'ble Bombay High Court has held that "this order does not give 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....