M/S.Bhagyanagar Industries Private Limited vs. The Assistant Commissioner (St)

Held

The Court allowed the writ petition, setting aside the action of the respondents in unilaterally blocking the petitioner's Electronic Credit Ledger. The Court followed the view taken in W.P. No. 10390 of 2024. The reasoning was based on the petitioner's contention that the blocking was done without adhering to the principles of natural justice. The Court reserved liberty for the respondent(s)-Department to file an appropriate application to revive the matter if they could demonstrate that the principles of natural justice were followed before taking the impugned action. The operative direction was to dispose of the writ petition and close it, with no costs awarded.

Facts

The petitioner, M/s Bhavanaqar Industries Private Limited, approached the Telangana High Court seeking a writ of mandamus. The petitioner challenged the action of the Assistant Commissioner (ST) in blocking its Electronic Credit Ledger (ECL) on three separate occasions: October 10, 2023, May 3, 2024, and June 20, 2024. The total amount blocked was Rs. 94,02,136/- (Rs. 47,01,068/- under CGST Act and Rs. 47,01,068/- under SGST Act). The petitioner contended that this blocking was done without proper authorization, without following Ministry of Finance guidelines dated November 1, 2021, and without considering their objections dated December 1, 2023, and June 22, 2024. The petitioner argued the action was arbitrary, without jurisdiction, and violated principles of natural justice.

Key Issues

1. Whether the action of the respondent in unilaterally blocking the petitioner's Electronic Credit Ledger without following the principles of natural justice is arbitrary and without jurisdiction, contrary to the provisions of the CGST Act, 2017 and SGST Act, 2017? The petitioner argued that the blocking of the ECL was done without any prior notice or opportunity to be heard, thus violating the principles of natural justice. They relied on the guidelines issued by the Ministry of Finance, Central Board of Indirect Taxes and Customs, GST Policy Wing, dated November 1, 2021, which mandate adherence to natural justice principles. The petitioner also cited a previous writ petition (W.P. No. 10390 of 2024) which they claimed squarely covered this matter. The respondents, represented by the Special Government Pleader for State Tax, submitted that subject to verification and liberty, if principles of natural justice were indeed not followed, a similar order to the one in the cited precedent could be passed.