2024 (8) TMI 1379 - HC - GST

Blocking of Input Tax Credit - Rule 86A of the GST Rules - jurisdictional error with regard to the issuance of the intimation more so when the reasons that weighed with the Department to issue the intimation notice were mentioned in Ext.P6 and P7 show cause notices that were issued shortly thereafter - HELD THAT - It is found from a perusal of Exts.P6 and P7 notices that were subsequently issued to the appellant that the Department was of the view that input credit was being availed on the basis of bogus invoices and it was this suspicion, based on materials gathered by the Department, that prompted the Department to issue Ext.P2 intimation so as to prevent the irregular availment of input tax credit by the appellant. While the appellant may have had a case to approach the writ court if there was any inordinate delay occasioned by the respondents in issuing the show cause notices, we find that the appellant had chosen not to approach this Court during the period between the receipt of intimation and the receipt of Ext.P6 and P7 show cause notices. The learned Single Judge was correct in relegating the appellant to his alternate remedy of replying to the show cause notices and getting the matter adjudicated by the adjudicating authority under the statute. As rightly observed by the learned Single Judge, this is not a case that warrants a belated interference with Ext.P2 intimation, by this Court under Article 226 of the Constitution of India. Appeal dismissed.

Summary

Issues:
1. Challenge to the blocking of input tax credit.
2. Jurisdictional error in the issuance of the intimation under Rule 86A of the GST Rules.
3. Compliance with CBEC Circular dated 02.11.2021.
4. Delay in approaching the court for remedy.

Analysis:
The Writ Appeal was filed against a judgment regarding the blocking of input tax credit. The appellant had initially received an intimation regarding the blocking of credit and later a show cause notice under Section 74(1) of the CGST Act, 2017. The appellant approached the court questioning the legality of the initial intimation after a significant delay following the receipt of the show cause notices. The Single Judge found no jurisdictional error in the issuance of the intimation, especially since the reasons for blocking the credit were provided in subsequent show cause notices. The Circular emphasized the non-mechanical exercise of discretion under Rule 86A of the GST Rules, requiring an objective determination based on material evidence related to fraudulent or ineligible input tax credit availed.

Upon reviewing the subsequent show cause notices, it was evident that the Department suspected the appellant of availing input credit based on bogus invoices, justifying the initial intimation to prevent irregular credit availment. The court noted that the appellant did not approach the court during the period between receiving the intimation and the show cause notices, choosing to do so much later. The court held that the appellant should have utilized the alternate remedy of replying to the show cause notices and having the matter adjudicated by the proper authority instead of seeking belated interference through a writ petition under Article 226 of the Constitution of India. Consequently, the Writ Appeal was dismissed, upholding the decision of the Single Judge.