2024 (10) TMI 121 - HC - GST

Blocking of input tax credit under Rule 86A of the CGST /SGST Rules 2017 without any just cause or reason - violation of principles of natural justice - HELD THAT - This writ petition can be disposed of permitting the petitioner to approach the authority who issued Ext. P7 / P9 and seek lifting of the orders blocking the credit to the tune of Rs. 1,77,250/- for the reasons indicated above. Since the petitioner has already filed Ext.P8, if the petitioner were to approach the authority who issued Ext. P9 (c), the matter shall be adjudicated by the said authority. Considering the difficulties pointed out by the learned counsel for the petitioner, the competent authority shall adjudicate the matter as contemplated by the provisions of sub-rule (2) of Rule 86A within a period of two weeks from the date of receipt of a certified copy of this judgment.

Summary

Issues:
Blocking of input tax credit under Rule 86A of CGST/SGST Rules 2017 without just cause or reason.

Analysis:
The petitioner approached the court challenging the blocking of input tax credit amounting to Rs. 1,77,250 under Rule 86A of the CGST/SGST Rules 2017, contending that all payments, including taxes, were made through bank transactions to a dealer in Tamil Nadu. The petitioner argued that since transactions were genuine, the credit should not have been blocked without valid grounds. The petitioner sought relief to claim the input tax credit.

The Government Pleader informed the court that the Tamil Nadu State GST Department had flagged the dealer in Tamil Nadu, M/s. T.V. Selvaraj & Co., as fraudulent for passing input tax credit through fake GST invoices without supplying goods. The petitioner's transactions with this dealer were also highlighted. The Government Pleader suggested that the matter could be resolved through adjudication by the competent authority under Rule 86A, emphasizing that the blocking of credit was temporary and did not hinder the petitioner's ability to file returns.

The petitioner, in response, expressed the inability to file returns due to the blocked credit of Rs. 1,77,250, emphasizing the adverse impact on compliance. However, the Government Pleader clarified that the credit block did not prevent the petitioner from filing returns but only restricted the use of the credit amount for tax liabilities.

After considering arguments from both sides, the court decided to allow the petitioner to approach the authority responsible for blocking the credit and request a review of the decision. The court directed the competent authority to adjudicate the matter within two weeks, considering the petitioner's difficulties. If the authority finds the petitioner eligible for the input tax credit, the petitioner may seek waiver of any associated penalties or fees.