2022 (6) TMI 467 - HC - GST

Blocking of input tax credit / electronic credit ledger account - Grant of interim order sought for in the writ petition - recovery of tax - HELD THAT - This court is of the view that while declining to interfere with the order of the learned Single Judge, it is deemed appropriate to direct the concerned respondent to dispose of the representation dated 21.02.2022 by taking note of the legal position and also bearing in mind that unless the appellant, who is a registered dealer, is allowed to carry on business and tax cannot be recovered. We should not be mistaken for saying as if errant dealer should be left scot free, if there is any illegal arrangement of input credit tax stringent action should be taken. However, till final orders are passed, if the credit which was not availed on the date when the blocking was done namely 16.02.2022 is also to be blocked, then it might cause prejudice to the dealer. The appeal stands disposed of.

Summary

Issues:
1. Interim order not granted in writ petition.
2. Blocking of electronic credit ledger account.
3. Representation submitted to State Tax Officer.
4. Legal position on blocking electronic credit register.
5. Disposal of representation by concerned respondent.
6. Prejudice to dealer if credit is blocked.
7. Timely disposal of representation.
8. No prejudice to rights of parties in pending writ petition.

Analysis:
The High Court judgment pertains to an intra-court appeal against an order passed in a writ petition where the interim relief sought was not granted due to the absence of a prima facie case. The impugned order blocked the electronic credit ledger account of the appellant dealer, affecting their business activities. The court directed the respondents to file an affidavit-in-opposition and granted liberty to file a reply before making a final decision.

The appellant, a scrap paper dealer, contended that they are honest taxpayers and have been in business for 30 years. They submitted a representation to the Assistant Commissioner of State Sales Tax requesting the withdrawal of the blocking of their electronic credit ledger, which was not considered. The appellant relied on a Gujarat High Court decision to argue that blocking electronic credit should only occur if input tax credit is fraudulently availed, and if the credit is not available or already utilized, the relevant rules cannot be invoked.

The court emphasized the need to balance the interests of the dealer and tax recovery, directing the concerned respondent to dispose of the pending representation within 10 days. It cautioned against prejudicing the dealer by blocking credit not availed at the time of blocking. The court clarified that any decision made should not impact the rights of either party in the ongoing writ petition.

In conclusion, the appeal was disposed of, and the connected application was also resolved, ensuring that the representation submitted by the appellant is duly considered, and the legal position on blocking electronic credit is adhered to while safeguarding the rights of both parties involved in the dispute.