M/S. A.S.E. INDIA vs. The Union Of INDIA And 4 Others

Held

The Court held that the impugned notice dated 02-12-2022 was issued in contravention of the provisions of the CGST and TSGST Acts. The Court noted that the notice (Annexure P2) called upon the Petitioner to submit an explanation, indicating it was not a final order of attachment. Furthermore, the Court observed that the notice was neither an order under Section 86A nor under Section 74 of the Act. The Court found that the blocking of the ITC account was done without adhering to the statutory provisions governing such actions. Consequently, the Court set aside the impugned notice dated 02-12-2022 on technical grounds. However, the Court clarified that the right of the revenue to take appropriate steps in accordance with law concerning the alleged invalid availment of ITC stands reserved. The writ petition was allowed on these technicalities, with consequential benefits to the Petitioner.

Facts

M/s. A.S.E.INDIA (the Petitioner) filed a writ petition challenging a notice dated 02-12-2022 issued by the Assistant Commissioner of State Tax (Respondent No. 3). This notice blocked the Petitioner's electronic credit ledger, impacting Input Tax Credit (ITC) amounting to Rs. 34,99,550/- (SGST) and Rs. 34,99,550/- (CGST). The Petitioner contended that the action was illegal, without jurisdiction, and contrary to the provisions of the Constitution of India and the Central Goods and Services Tax Act, 2017. The Petitioner argued that the respondents failed to comply with statutory requirements before blocking the ITC, that the order was non-speaking, and that their explanation and supporting documents (purchase/sales ledgers, weighment bills) were not considered. The Petitioner also claimed the blocking was done without prior show cause notice, causing severe financial hardship.

Key Issues

1. Whether the notice dated 02-12-2022, which blocked the Petitioner's electronic credit ledger and ITC, was issued in contravention of the statutory provisions governing the blocking of ITC under the CGST Act, 2017 and Rules framed thereunder? Petitioner's Arguments: The Petitioner argued that the respondents failed to comply with the statutory requirements under the CGST Act and Rules prior to blocking the electronic credit ledger. They contended that the impugned order was a non-speaking order, lacking reasons for initiating proceedings under Rule 86A. The Petitioner asserted that their reply, including relevant documents like purchase and sales ledgers and weighment bills, was not considered, and the blocking was done without a prior show cause notice, making it bad in law. They relied on the provisions of Rule 86A of the CGST Rules. Revenue's Arguments: The State/Respondents contended that the Petitioner had fraudulently availed ITC by providing invoices from non-existing entities. They claimed to have received intimation from Respondents No. 1 and 2 regarding large-scale discrepancies and fraudulent ITC availed by the Petitioner and others using fake invoices from non-existent companies, necessitating the blocking of the Petitioner's ITC account.