2021 (2) TMI 685 - HC - GST

Blocking of petitioner s credit ledger - no reasons assigned for such blockage - reasons to believe - Rule 86A of the Central Goods and Services Tax Rules, 2017 - HELD THAT - It would be just and reasonable to dispose of the writ petition calling upon the Assistant Commissioner to pass a detailed reasoned order as required under Rule 86A of the Rules while observing that for the purposes of Rule 86A(3) which stipulates that the blockage shall cease to have effect after the expiry of a period of one year from the date of blocking, the effective date shall continue to be 21.01.2020. Petition disposed off.

Summary

Issues:
1. Blocking of petitioner's credit ledger without reasons assigned.
2. Compliance with Rule 86A of the Central Goods and Services Tax Rules, 2017.
3. Justifiability of the impugned order.

Blocking of Credit Ledger without Reasons Assigned:
The petitioner was aggrieved by the Communication dated 10.6.2020, which informed them that their credit ledger was blocked without providing any reasons. The petitioner, represented by an advocate, was unaware of the authority behind the blockage and corresponded with the concerned office to seek clarification. It was revealed that the credit ledger was blocked based on a request from the Commissioner of North West Commissionerate due to fraudulent activities by one of the petitioner's vendors. The lack of reasons for the blockage raised concerns regarding procedural fairness and transparency.

Compliance with Rule 86A of the CGST Rules, 2017:
The petitioner's counsel argued that Rule 86A mandates that the blocking of a credit ledger can only be done by an authorized officer not below the rank of Assistant Commissioner, who must have valid reasons to believe that specific circumstances exist. In this case, no reasons were initially provided for the blockage, leading to a lack of procedural compliance. The absence of proper documentation and reasoning behind the blockage undermined the legality and validity of the action taken against the petitioner.

Justifiability of the Impugned Order:
The respondent's counsel could not dispute the fact that the reasons for blocking the credit ledger were not mentioned promptly but were only provided later in the impugned Communication. The Court, considering the circumstances, directed the Assistant Commissioner to issue a detailed reasoned order as required by Rule 86A. It was held that for the purposes of Rule 86A(3), which states that the blockage ceases after one year from the date of blocking, the effective date remained 21.01.2020. Consequently, the writ petition was disposed of, emphasizing the need for procedural regularity and adherence to statutory provisions in matters concerning the blocking of credit ledgers under the GST regime.