2022 (3) TMI 737 - HC - GST

Blocking of Input tax credit - mismatch or excess availment of ITC - non-consideration of rectification application submitted by the assessee - opportunity of hearing to the petitioner company not provided - violation of principles of natural justice - HELD THAT - It appears from perusal of the order passed by the Apex Court which stands further extended up to 28.02.2022 vide order dated 10.01.2022 that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the period prescribed under Sections 23 (4) 29 (A) of the Arbitration and Conciliation Act, 1996, Section 12 A of the Commercial Court Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation not only for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of the proceedings. As such it is not only the delay in filing of suits, appeal, application or any proceedings which stands relaxed for the period 15.03.2020 till 28.02.2022, but even the period of limitation for termination of proceedings. The respondents perhaps are labouring under the impression that since the period of six months contemplated under Section 161 of the JGST Act, 2017 has expired much before they are precluded from deciding the application. It is also evident that the application remained undecided not on account of any fault on the part of the petitioner. The respondents cannot therefore take advantage on their wrong also. The respondents should take a decision on the application for rectification dated 28th September, 2019 pending before them in accordance with law as expeditiously as possible - petition disposed off.

Summary

Issues:
- Violation of principles of natural justice
- Failure to follow the procedure prescribed in law before passing an adverse order
- Blocking of Input Tax Credit in the electronic ledger account
- Maintainability of application for rectification

Analysis:
1. The petitioner sought various reliefs, including challenging an order passed by the Respondent Department levying tax, interest, and penalty for alleged excess Input Tax Credit (ITC) without providing an opportunity for a hearing. The petitioner argued that the order was passed summarily without following prescribed modalities. Additionally, the petitioner questioned the blocking of ITC in the electronic ledger account. The petitioner contended that no discrepancy or excess ITC was claimed and filed for rectification, which remained pending without any decision, leading to the blocking of a significant amount in the electronic ledger.

2. The petitioner argued that the writ petition was maintainable due to the violation of principles of natural justice and failure to adhere to the procedural requirements before imposing tax, interest, and penalty under the JGST Act. Citing a relevant case, the petitioner emphasized the necessity of a proper show cause notice before initiating proceedings. The petitioner highlighted the failure of the Respondents to address discrepancies in returns and the prolonged blocking of ITC, urging for the quashing of the summary order and unblocking of the electronic ledger account.

3. The Respondent Department contended that the procedure was duly followed before imposing tax, interest, and penalty on the petitioner. The Respondent argued that the petitioner did not file an appeal within the stipulated time frame and that the application for rectification was not maintainable for reviewing the order under Section 73. The Respondent maintained that the period for deciding on the rectification application had lapsed, hence preventing any action on the application.

4. The Court considered the submissions and noted that the application for rectification was made within the prescribed period, and the limitation period was extended due to the COVID-19 situation as per orders of the Apex Court. The Court clarified that the Respondents should decide on the rectification application promptly, considering the extended limitation period. However, the Court found that the challenge to the order passed under GST could not be entertained in writ jurisdiction due to the expired statutory remedy period. The Court directed the Respondents to decide on unblocking the electronic ledger account within a specified timeframe.

5. In conclusion, the Court disposed of the writ petition, allowing the petitioner to avail statutory remedies under the JGST Act if aggrieved by the rectification order. The Respondents were directed to make a decision on unblocking the electronic ledger account within a stipulated period, considering the prolonged blocking duration.