The Bombay High Court has held that adequate emphasis to be not only on ‘having reasons to believe’ to block ITC but also on ‘recording of the reasons’ under GST.
The petitioner, Dee Vee Projects Ltd. company was registered under the provisions of erstwhile State Sales Tax Act and after the Sales Tax was subsumed into the Goods and Service Tax vide the Central Goods and Services Tax Act, 2017 which came into force with effect from 12.4.2017, the company was deemed to be registered under the CGST Act, by virtue of operation of section 26 of the CGST Act.
In the year 2020, there were certain changes in the management of the company and, therefore, it sought amendment to the registration certificate, which was granted on 18.7.2020. Thereafter, the company changed its registered address and again sought amendment to the registration certificate as regards `change of address’ which was granted on 2.11.2020.
The petitioner submits that after commencement of GST regime, the petitioner regularly filed its returns till September 2020. Till that time, the petitioner further submits, it had also availed of the credit available in it’s Electronic Credit Ledger (ECL) to the extent of Rs.48,79,61,446/- as permissible under law.
The petitioner submitted that it sent representation on 2.7.2021, protesting against the unlawful attachment of its property and blocking of ECL and also sent a reminder on 14.7.2021 with a request to unblock the ECL. The petitioner submits that the representation, however, was rejected by respondent for reasons not earlier recorded. The petitioner further submits that it was at this time that the petitioner learnt about the fact that blocking of petitioner’s ECL was done under rule 86-A of the Central Goods and Service Tax Rules, 2017. The petitioner maintains that the procedure prescribed in rule 86-A, however, was not followed.
The division bench of Justice Anil S.Kilore and Justice Sunil B.Shukre has held that it is not necessary for us to answer it in specific terms as the impugned order itself has been found to be not worthy of upholding. The necessity for examining justification for issuance of the impugned order would have arisen, had it been held that the impugned order is sustainable in law on the touchstone of due process but requires consideration on merits, which is not the case here.
“We are of the opinion that rule 86-A has been adequately framed by the rule making authority so as to take care of any possible misuse of the power. The authority has ensured that sufficient safeguards against the misuse of power are embedded in rule 86-A itself and accordingly the rule has been framed. We have already explained in detail the meaning, extent, necessity and manner of operation of these safeguards and, therefore, we do not think that anything more than what we have done here is required to be done,” the court said.
Dee Vee Projects Ltd. vs The Government of Maharashtra, Department of Goods and Services Tax
CITATION: 2022 TAXSCAN(HC) 185
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