Ashapura Steel Metal Through Velaram Viraji Choudhary vs. Union Of INDIA

Held

The Court held that the State Tax Officer did have the jurisdiction to pass the impugned order under Rule 86-A of the CGST Rules. This was based on the combined reading of Section 5 of the MGST Act and Section 6 of the CGST Act, which permit the delegation of powers to officers of the State Tax Department to exercise powers under the CGST Act, including those under Rule 86-A. The Court noted that a notification dated January 24, 2020, issued by the Commissioner of State Tax, explicitly conferred powers on officers like the Sales Tax Officer to pass orders under Rule 86-A. The Court also found that the subsequent roznama order dated April 10, 2023, rejecting the petitioner's objections, was unsustainable. It was not in consonance with the initial order's promise of an opportunity to be heard and was contrary to Rule 86-A(2), which allows for the review of blocked credit. The Court quashed the April 10, 2023 order and directed the State Tax Officer to hear the petitioner on its objections to the March 10, 2023 order, considering the documents submitted, and pass a detailed order. All contentions were expressly kept open. The petitioner was directed to appear on October 27, 2023, and the State Tax Officer was to pass an order by November 10, 2023.

Facts

The petitioner, Ashapura Steel Metal, challenged an order dated March 10, 2023, by the State Tax Officer, which blocked its input tax credit (ITC) amounting to Rs. 47,53,041.76 (Rs. 23,76,520.88 under CGST and equivalent under MGST) for the periods 2021-22 and 2022-23. The blocking was done under Rule 86-A of the CGST/MGST Rules, citing fraudulent availment of ITC. The petitioner argued that the State Tax Officer lacked jurisdiction to block CGST credit. The petitioner submitted an email on March 28, 2023, with objections. The State Tax Officer, by a roznama order dated April 10, 2023, rejected these objections, suggesting an appeal under Section 107(1) of the CGST/MGST Act, but this order was not communicated to the petitioner and did not address the petitioner's contentions.

Key Issues

1. Whether a State Tax Officer, appointed under the MGST Act, has the jurisdiction to block input tax credit under Rule 86-A of the CGST Rules, 2017, for credit availed under the CGST Act? The petitioner contended that the State Tax Officer, being a state machinery officer, could only exercise powers under the MGST Act and not the CGST Act, particularly concerning Rule 86-A of the CGST Rules. The petitioner relied on the specific wording of Rule 86-A of the CGST Rules. The respondents argued that Section 5 of the MGST Act and Section 6 of the CGST Act, read with a notification dated January 24, 2020, conferred the necessary powers on the State Tax Officer to act under Rule 86-A of the CGST Rules. 2. Whether the subsequent order dated April 10, 2023, rejecting the petitioner's objections, was passed in accordance with law and provided a proper opportunity to the petitioner? The petitioner argued that this order was not communicated, failed to address its contentions on merits, and wrongly directed the petitioner to file an appeal, contrary to the opportunity promised in the initial order and Rule 86-A(2) of the CGST/MGST Rules.