Patna HC Upholds Order passed u/r 86 -A (1) of CGST Rules Citing Valid reason for Blocking ITC [Read Order]

The Patna High Court  upheld the order passed under rule 86-A (1) of the Central Goods and Service Tax Rules (CGST) as there was valid reason for blocking Input Tax Credit (ITC).

Graphic Trades, the petitioner company is engaged in business of providing end to end solutions in the field of Information Technology. It procures goods and services from third party vendors across the country, on payment of applicable Goods and Services Tax ( 'GST') i.e. the input tax on the purchase of goods/services in course of furtherance of its business. It is stated that in terms of Section 16 of the Bihar Goods and Services Tax ( 'BGST'), the petitioner is entitled to take credit of such input tax charged on the supply of goods/services and utilize the Input Tax Credit ('ITC').

It would appear from the reliefs prayed in the writ application that the petitioner has challenged only Annexure 'P/2' issued by the Additional Commissioner State Taxes, Central Investigation Bureau, Bihar (respondent no. 3) regarding the search carried out at the principal place of business of M/s TDML Services Private Limited at 13/12, Chinar Park, Clubtown. Gateway, Hatiara, New Town, North Twenty Four Parganas, West Bengal, 700157. After investigation the said entity was found non-existent at the principal place of business.

Respondent No. 3 directed respondent no. 4 to take appropriate action against the petitioner who is in the recipient's list of M/s TDML Services Private Limited and had availed the benefit of input tax credit unlawfully. With the writ application the decision of the respondent no. 4 has not been enclosed and it is not specifically under challenge but a direction has been sought for against respondent nos. 3 and 4 to unblock the ITC lying in the Electronic Credit Ledger ( 'ECL') of the petitioner amounting to Rs. 1,18,42,455/-.

Worried About SME IPO Pitfalls? Gain Clarity with This Advanced Course! Register Now

The petitioner has submitted that Patna High Court has been sought for against respondent nos. 3 and 4 to unblock the ITC lying in the Electronic Credit Ledger (hereinafter referred to as the 'ECrL') of the petitioner amounting to Rs. 1,18,42,455/-. Counsel for the petitioner has submitted that Patna High Court State Taxes, Central Investigation Bureau, Bihar vide Memo No. 198 dated 07.02.2025.

Rule 86A of the Bihar Goods Services Tax Rules, 2017. ( 'BGST Rules of 2017')/Central Government Goods Services Tax Rules the 'CGST') It would appear to mandate recording of reasons.

Allahabad HC quashes ₹2.11 Cr GST Demand u/s 74 Due to Lack of Personal Hearing [Read Order]

It is evident on a bare reading of the Rule 86A (1) that the Commissioner or an officer authorized by him not below the rank of Assistant Commissioner having reasons to believe that credit of input tax available in the Electronic Credit Ledger has been fraudulently availed or ineligible, can proceed to pass an order blocking the ITC to the said extent. The Joint Commissioner (respondent no. 4) has ultimately blocked the input tax credit to the extent indicated hereinabove.

A division bench of Justice Rajeev Ranjan Prasad and Justice Ashok Kumar Pandey observed that no illegality or infirmity may be found with the impugned order (Annexure 'P/2') which is in the nature of an interim measure taken by respondent no. 3. The respondent no. 4 has acted on the basis of of Annexure "P/2", however, the order, if any of respondent no. 4 is not under challenge specifically. The petitioner has a remedy available against the blocking of ITC. If so advised, the petitioner may avail it's remedy in terms of paragraph 3.4 of the guidelines. If any such request is made by the petitioner, the respondent no. 4 shall consider the same as expeditiously as possible and pass a reasoned order after hearing the petitioner/its authorized representative.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates