2022 (5) TMI 458 - HC - GST

Blocking of ITC - investigation being carried out with regard to fake invoices - HELD THAT - Prima facie investigations will have to be individualized and particulars will have to be given vis- -vis each assessee. At the moment there is no such material on record. The matter requires examination; especially in view of the fact that the ITC in the case of petitioner no.2 has remained blocked for more than the prescribed period under Rule 86A(3) which is one year - Issue notice.

Summary

Issues Involved:
1. Whether petitioner no.1, Sales Tax Bar Association (Regd.), should continue as a party in the proceedings.
2. Validity of the impugned action of blocking Input Tax Credit (ITC) and adjusting it contrary to Rule 86A(3) of the Delhi Goods and Services Tax Rules, 2017.
3. Lack of reasons in the show cause notice and orders, and absence of a hearing granted to petitioner no.2.
4. Blocking of ITC due to an investigation regarding fake invoices without individualized investigations or specific particulars provided.
5. Duration of the blocked ITC exceeding the prescribed period under Rule 86A(3).

Analysis:
1. The court deliberated on whether petitioner no.1, Sales Tax Bar Association (Regd.), should remain a party in the proceedings. It was decided that since petitioner no.2 is directly affected by the impugned action of the respondents/revenue, petitioner no.1 need not continue as a party. The court emphasized the importance of considering the facts related to petitioner no.2 in the adjudication process.

2. The court noted the contentions raised by Mr. Agrawal regarding the lack of reasons in the show cause notice and orders, and the absence of an independent application of mind by the concerned officer. It was highlighted that no hearing was granted to petitioner no.2 before blocking the ITC. The respondents/revenue had blocked the ITC due to an investigation concerning fake invoices. The court observed that investigations need to be individualized, and specific particulars must be provided for each assessee.

3. Considering the duration of the blocked ITC exceeding the prescribed period under Rule 86A(3), the court opined that the matter requires thorough examination. The court emphasized the need for material on record to support the blocking of ITC and stressed the importance of individualized investigations. The court issued notice to the respondents/revenue and directed the filing of a counter-affidavit within four weeks, with a rejoinder, if any, to be filed before the next hearing date. The counsel for the petitioner was instructed to file an amended memo of parties within the next ten days, and the matter was listed for the next hearing on 29.07.2022.