In a significant case, the High Court Of Orissa allowed the assessee 30 days time to file return after unblocking input tax credit ( ITC ) which was blocked due to wrongful availment. It was held that the proper officer has exercised discretion in intimating petitioner that ITC has wrongly been availed by him and therefore there will be determination and recovery of tax.
Mr. Patnaik, advocate appeared on behalf of petitioner, Amit Metaliks Company and submitted communications on blocking of Input Tax Credit ( ITC ), entitlement, of his client are all disclosed. It refers us to our judgment dated 10th September, 2024 in (M/s. Atulya Minerals, Jurudi, Jajang, Keonjhar v. Commissioner of State Tax, Commissionerate of CT and GST, Lok Seva Bhwan, Cantonment Road, Cuttack and others) to submitted his contention relates to sub-rule(1) under rule 86A in Odisha Goods and Services Tax Rules, 2017.
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Sub-section(1) Section 74 in Odisha Goods and Services Tax Act, 2017 provides, inter alia, for determination of tax on ITC wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts. The provision requires revenue to issue show-cause as to why the dealer should not pay the amounts specified in the notice along with, inter alia, interest. Rule 86A, therefore, must follow the provision, for mandatory issuance of show-cause notice.
Impugned communications are straightway intimations on blocking of ITC without the authority having earlier issued show-cause notices in respect thereof. It was further submitted that there has to be a show-cause notice issued under section 74, for determination of the tax, after which there can be blocking.
The Petitioner filed a letter seeking to demonstrate that after availing ITC, allegedly wrongfully, there was available ITC amounting to ₹25,23,498/-, as acknowledged by the authority on letter dated 2nd September, 2024. In the letter, it was also said that the available ITC, amounting to ₹25,23,498/- was thereby blocked under rule 86A. However, what was actually done is, without determination, the available ITC appropriated to show a negative balance ITC of ₹52,50,376/- .
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Mr. Mishra, advocate, Standing Counsel appeared on behalf of revenue and submitted rule 86A does not correspond to section 74. Blocking under rule 86A is an interim arrangement and has nothing to do with determination under section 74. Recovery of tax is provided for under section 79. It comes after the determination is made.
Rule 86A provides for blocking of available input credit. Section 74 deals with determination of tax, inter alia, on wrongfully availing ITC. Thus we see an essential difference between section 74 operating in a field where ITC has already been availed of and rule 86A, operating where there is available ITC. In the circumstances, requirement under section 74 for issuance of show cause notice cannot be implied as mandate of pre-condition for blocking under rule 86A.
Revenue is required to answer in uploading information in the electronic ledger to show that petitioner has negative ITC. The negative entry implies action taken on recovery. Petitioner is before us because there has been blocking of his available ITC, the availed part of it alleged by revenue to be wrongful.
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On query from Court Mr. Mishra submitted there is no provision enabling negative entry in electronic ledger regarding ITC in respect of a registered dealer. Revenue will cause correction by uploading the correct figure of available ITC. At best there can be further information uploaded in the ledger to show that the available ITC stands blocked.
Mr. Patnaik submitted pursuant to reasons furnished for blocking, his client had applied for unblocking. The application was by representation dated 10th August, 2024 followed up by reminder. The authority is directed to deal with the representation expeditiously, within two weeks of communication.
Assessment has been made under section 62, alleging non-filing of return when his client, could not file GST return because of wrong information uploaded in the electronic ledger. Sub-rule(1A) under rule 142 and lays emphasis that discretion is granted to the proper officer to issue intimation prior to, inter alia, service of notice under subsection (1) in section 74. The intimation is exactly that. Show-cause notice will follow because petitioner cannot dispute the intimation.
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So far as the assessment made under section 62 is concerned it submitted that blocking of ITC has nothing to do or is not an impediment for a registered dealer to file return. Referring to sub-section(2) in section 62 he points out, the dealer can file return within 30 days of receipt of the assessment order. Petitioner has the remedy.
The proper officer has exercised discretion in intimating petitioner that ITC has wrongly been availed by him and therefore there will be determination and recovery of tax. Justice Arindam Sinha
and Justice M.S. Sahoo directed that petitioner will have 30 days to file return commencing from date of communication of decision taken on his representation for unblocking his ITC.
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