Dds Jewels Private Limited vs. State Of Maharashtra Thr Agp Office And Ors

Held

The Court held that the notices dated June 30, 2025, were indeed show-cause notices, requiring the Petitioner to reply by July 3, 2025. The Court found that the department violated the principles of natural justice by issuing the impugned orders on July 2, 2025, without waiting for the notice period to expire and without considering the Petitioner's reply filed on July 3, 2025. The Court quashed and set aside the impugned orders dated July 2, 2025, and directed the restoration of the status quo ante, including the deblocking and reversal of any negative credit in the Petitioner's electronic credit ledger by September 24, 2025. The Court clarified that the department was at liberty to proceed with the show-cause notices dated June 30, 2025, after considering the Petitioner's reply and providing a personal hearing by October 10, 2025. The Petitioner undertook not to utilize any credit from its ledger until the disposal of the show-cause notices. The Court left undecided the controversy regarding whether the action was a debit or a blockage of credit. All contentions on merits and proceedings under Section 74 of the MGST Act were left open.

Facts

The Petitioner, DDS Jewels Private Limited, challenged orders dated July 2, 2025, passed by the State of Maharashtra and Others, which restricted the use of fraudulent Input Tax Credit (ITC) under Rule 86-A(2) of the CGST/MGST Rules. Prior to these orders, the department issued notices on June 30, 2025. The Petitioner contended these were show-cause notices, while the Revenue argued they were mere intimations. The Petitioner filed a reply on July 2, 2025, which was received by the department on July 3, 2025. However, the impugned orders were issued on July 2, 2025, before the expiry of the notice period and without considering the Petitioner's reply.

Key Issues

1. Whether the notices dated June 30, 2025, issued by the department were show-cause notices as contemplated by Rule 86-A of the CGST/MGST Rules, 2017? The Petitioner argued that these notices were indeed show-cause notices, requiring a reply by July 3, 2025, and that the department failed to wait for this period to expire before passing the impugned orders. The Revenue contended that these were not show-cause notices but only intimations regarding the proposal to exercise powers under Rule 86-A. 2. Whether the impugned orders dated July 2, 2025, were passed in violation of the principles of natural justice? The Petitioner argued that the orders were passed prematurely and without considering their reply, which was filed within the stipulated time. The Revenue did not explicitly argue this point but implied that no show-cause notice was necessary. The Court also noted a dispute regarding whether the action constituted a debit or a blockage of credit, but did not decide this issue.