ITC should have Blocked only after conveying Recorded Reasons to Dealer: Allahabad High Court [Read Order]

The Allahabad High Court ruled that the Input Tax Credit (ITC) should have Blocked only after conveying recorded reasons to the Dealer.

The petitioner, M/s North End Food Marketing Pvt. Ltd. is mainly dealing in “Mentha” oil in the State of Uttar Pradesh and is duly registered under the provisions of U.P. Value Added Tax Act, 2008. The petitioner availed the credit of input tax paid on the purchases made from the dealers registered in the State of Uttar Pradesh in accordance with the provisions of UPVAT Act and after deducting the same from the output tax payable, discharged the net tax liability as per provisions contained in UPVAT Act. After enactment of Central Goods and Services Tax Act, 20174 and U.P. Goods and Services Tax Act, 2017 the petitioner was allotted GSTIN.

The petitioner company was contesting with the respondents in respect of the drums seized from the warehouses of SCMPL by email sent by the Goods and Services Tax network. For the first time, it was transpired to the petitioner through e-mail communication that the input tax credit available in the electronic credit ledger of the petitioner has been blocked and upon further enquiry, copy of the decision taken by the respondent no.5 was provided to the petitioner on 06.8.2020 informing that input tax credit under the CGST Act and SGST Act was blocked under Rule 86-A of the SGST Rules.

Mr. Navin Sinha, learned Senior Advocate appearing for the petitioner submitted that the respondent in most arbitrary manner and without application of mind, has passed the impugned order in complete violation of principles of natural justice. More so, the jurisdiction under Section 108 of the SGST Act can be exercised by the revisional authority on his own motion and upon information received by him or on request of Commissioner of Central Tax, if he considers that any decision or order passed by any officer subordinate to him is erroneous insofar as it is prejudicial to the interest of revenue and illegal or improper or has not taken into account any material facts, he may stay the operation of such decision or order and after giving the person concerned an opportunity of being heard, pass such order, as he thinks just and proper including enhancing or modifying or annulling the decision or order.

The single judge bench of Justice Mahesh Chandra Tripathi while allowing the appeal held that the order impugned has been passed in absence of record and the revenue authority has proceeded to endorse on the dotted line, which has been submitted by the subordinate officer. Even though, the appellate order was appealable, which clearly reflects that said action is contrary to the procedures contained therein. The order must be supported by reasons but unfortunately the revisional authority or Commissioner did not choose to give reasons in support of order passed by him. This was in plain disregard to the requirement of law. The said order does not satisfy the requirement of law. Therefore, the said action cannot be accepted.

To Read the full text of the Order CLICK HERE

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