2023 (1) TMI 1222 - HC - GST

Blocking of electronic credit ledger - No reasons were informed - Prayer for grant of the interim order pending consideration of such declaratory relief - vires of Rule 86A of the Central Goods and Services Tax Rules, 2017 - HELD THAT - The concession made by the learned advocate for the appellant on behalf of the appellant is placed on record and the prayer for declaration of Rule 86A of the said Rules as ultra vires is struck off. The other prayer made by the appellant/writ petitioner is to withdraw the blocking of the electronic credit ledger and restore the input tax credit. Such positive direction cannot be granted at this stage as the appellant does not know as to what are the reasons, which weighed in the mind of the appropriate authority before passing the order blocking the electronic credit ledger - the following order will meet the ends of justice and simultaneously protect the interests of revenue as well. The writ petition as well as this appeal and the connected application are disposed of by directing the appropriate authority to intimate to the appellant within ten days from the date of receipt of server copy of this judgment and order the reasons for which the electronic credit ledger of the appellant was blocked along with the information as to which authority had passed such an order.

Summary

Issues:
Challenge to the vires of Rule 86A of the Central Goods and Services Tax Rules, 2017; Blocking of electronic credit ledger and restoration of input tax credit.

Analysis:
The judgment by the High Court of Calcutta involved an intra-Court appeal against the order denying interim relief to the writ petitioner in a case related to Rule 86A of the Central Goods and Services Tax Rules, 2017. The appellant sought to challenge the vires of Rule 86A but later agreed to withdraw this prayer. Instead, the appellant requested the withdrawal of the blocking of the electronic credit ledger and restoration of input tax credit. The Court considered this request but highlighted the need for the appellant to be informed of the reasons behind the blocking of the credit ledger before any decision could be made. The Court emphasized the importance of protecting the interests of revenue while ensuring justice. Consequently, the Court directed the appropriate authority to provide the reasons for blocking the credit ledger to the appellant within ten days. The appellant was given the opportunity to file objections within seven days of receiving the reasons, followed by a personal hearing and a speaking order within two weeks after the hearing.

The Court acknowledged the concession made by the appellant regarding the challenge to Rule 86A and struck off the prayer for declaring it ultra vires. However, the Court refrained from immediately granting the request to restore the input tax credit, citing the necessity for the appellant to be aware of the reasons behind the blocking of the credit ledger. The Court's decision aimed to balance the interests of justice and revenue by ensuring transparency in the process. The judgment emphasized the importance of providing the appellant with an opportunity to respond and be heard before a final decision was made regarding the restoration of the input tax credit.

In conclusion, the High Court of Calcutta disposed of the writ petition and the appeal by issuing a comprehensive order. The Court directed the appropriate authority to disclose the reasons for blocking the electronic credit ledger to the appellant promptly. The appellant was granted the opportunity to present objections and participate in a personal hearing before a final decision was made on the restoration of the input tax credit. The judgment highlighted the significance of following due process and ensuring a fair opportunity for the appellant to address the issues raised, thereby upholding the principles of natural justice and fairness in the legal proceedings.