2022 (4) TMI 417 - HC - GST

Blocking of input tax credit - Rule 86 A of the C.G.S.T. /U.P. G.S.T. Rules, 2017 - HELD THAT - From perusal of Rule 86 A(2) of the C.G. S.T./U.P. G. S.T. Rules, 2017, and the guidelines of the Commercial Tax vide Letter No.GST/2021-22/ 30 / Commercial Tax, it is opined that the petitioners should first approach the authorised Officer raising objections against the blocking of the input tax credit and the said authority would be under an obligation to decide the objection within a time bound period. Petition disposed off.

Summary

Issues:
Blocking of input tax credit under Rule 86 A of the C.G.S.T./U.P. G.S.T. Rules, 2017.

Analysis:

1. Blocking of Input Tax Credit:
The writ petitions were filed challenging the blocking of input tax credit by the concerned authority under Rule 86 A of the C.G. & S.T. Rules, 2017. Rule 86 A(2) empowers the Commissioner or the authorized officer to disallow the debit of electronic credit ledger if conditions for disallowance no longer exist. The guidelines issued by the Commissioner of Commercial Tax, U.P., elaborate on the grounds for disallowing debit of an amount from the electronic credit ledger under Rule 86 A. These guidelines emphasize the need for a proper application of mind before disallowing the debit, ensuring that the reasons are based on material evidence related to fraudulently availed or ineligible input tax credit.

2. Grounds for Disallowing Debit:
The rule specifies various grounds for disallowing debit, including availing credit from non-existent suppliers, availing credit without receiving goods or services, or availing credit without proper documentation. The Commissioner or the authorized officer must form an opinion based on these grounds and the amount of input tax credit involved before disallowing the debit. The power under Rule 86 A should not be exercised mechanically but with careful examination of facts to protect revenue interests.

3. Proper Authority and Procedure:
The Commissioner is the proper officer for disallowing the debit, but authorized officers can also exercise this power based on monetary limits. The procedure for disallowing debit involves ascertaining the fraudulently availed or ineligible input tax credit, recording reasons to believe in writing, and informing the concerned registered person about the action taken. The authority can re-examine the matter and allow the use of disallowed credit if found eligible, subject to certain conditions.

4. Disposal of Writ Petitions:
The High Court disposed of the writ petitions, allowing the petitioners to submit objections before the authorized officer under Rule 86 A(2) within a specified period. The concerned authority is directed to decide on the objections within a time-bound manner, providing a speaking and reasoned order after affording a reasonable opportunity of hearing to the petitioners. The Court clarified that it did not express any opinion on the merits of the case.

This judgment highlights the importance of following due process and proper assessment before blocking input tax credit under Rule 86 A, ensuring that decisions are based on valid grounds and evidence to protect revenue interests while providing an opportunity for affected parties to raise objections and seek redressal within a defined timeline.