M/S Jai Bajrang Steel vs. State Of Rajasthan

Facts

M/s Jai Bajrang Steel (Petitioner) challenged the action of blocking its electronic credit ledger of Input Tax Credit (ITC). The Petitioner contended that the ledger was blocked without providing an opportunity to be heard. The blocking occurred even before an appeal could be filed against an adjudication order dated August 30, 2024, which was rectified on November 28, 2024. The Respondents are the State of Rajasthan and its tax authorities, along with the Union of India. The Petitioner had not discharged the tax liability as per the adjudication order, nor had it filed an appeal. There was no stay of demand granted.

Held

The Court held that the blocking of the electronic credit ledger of ITC, per se, does not amount to recovery. It acknowledged that the Petitioner had not discharged the tax liability or filed an appeal. The Court noted that Section 107 of the RGST Act/CGST Act provides the petitioner with the right to file an appeal. In the absence of a stay of demand, the authority was within its rights to block the availment of ITC. However, the Court directed that it is open for the Petitioner to file an appeal. Upon filing the appeal and representing the authority with proof of filing, the authority shall examine whether appropriate orders are required to be passed regarding the unblocking of the electronic credit ledger of ITC, in view of Section 107 of the RGST Act/CGST Act. The writ petition was disposed of with liberty to the petitioner to revive it if necessary.

Key Issues

1. Whether the blocking of the electronic credit ledger of ITC, prior to the filing of an appeal against the adjudication order, is a valid action, considering the Petitioner was not heard. Petitioner's Contention: The Petitioner argued that the blocking of its ITC ledger was done without affording it an opportunity of being heard, which violates principles of natural justice. The action was taken prematurely, before the Petitioner could avail its statutory remedy of appeal. Respondents' Contention: The Respondents contended that the Petitioner had neither discharged the tax liability ordered in the adjudication nor filed an appeal. They asserted that in the absence of a stay of demand, the blocking of the ITC ledger was permissible. They also referred to Section 78 of the RGST Act/CGST Act, implying that recovery could not be initiated within three months, and blocking of the ledger is distinct from recovery.