M/S Rithwik Project Private Limited Through Its Seniour Vice President vs. Union Of INDIA Through The Secretary And Others

Held

The Court held that the order dated 8/9/2025, which blocked the petitioner's Credit Ledger Account, was to be set aside. The Court acknowledged that the authorities had not provided reasons for the impugned order. While the petitioner had not fully availed the opportunity to furnish documents earlier, the respondent authorities had now offered a post-decisional hearing, which the petitioner was ready to undertake. The Court found it appropriate to interfere with the order. The Court's decision was based on the condition that the petitioner furnishes a Bank Guarantee from a Nationalised Bank for Rs. 6,50,00,000/-. The GST authorities were directed to grant the petitioner a full opportunity to present its case and then pass necessary orders within four months. Furthermore, the respondent authority was restrained from encashing the Bank Guarantee until four months after passing its decision in the proceedings.

Facts

The petitioner, M/s Rithwik Projects Private Limited, filed a writ petition challenging the blocking of its Credit Ledger Account by the GST authorities. The petitioner contended that the mandate of Rule 86-A of the GST Rules was not followed, specifically that the order lacked the required "reason to believe" as stipulated in the rule. The authorities had not provided any reasons when passing the impugned order. The petitioner had been issued a notice/summons to furnish documents, including those related to supplies made by Darwin Platforms Infrastructure Limited, and had sought time to comply, which it did not ultimately avail. The respondent GST authorities have now offered a post-decisional hearing, which the petitioner is willing to participate in.

Key Issues

1. Whether the blocking of the petitioner's Credit Ledger Account by the respondent GST authorities was in accordance with the mandate of Rule 86-A of the GST Rules, particularly concerning the requirement of "reason to believe"? Petitioner's arguments: The petitioner argued that the order blocking its Credit Ledger Account was passed without adhering to the mandate of Rule 86-A. Specifically, the phrase "reason to believe" as required by the rule was not reflected in the reasons supporting the impugned order. The petitioner also referred to the Gujarat High Court's observation in *New Nalbandh Traders Vs. State of Gujarat* that even if reasons are cited, a post-decisional hearing must be given within two weeks. Respondents' arguments: The learned Standing Counsel for the GST authorities relied on the Orissa High Court's judgment in *Transtech Solution Vs. The Commissioner Ct & GST* to submit that the petitioner should cooperate with the investigating agency to bring the matter to a logical conclusion.