Rapidue Technologies Private Limited vs. The Deputy Commissioner Of Central Tax

Held

The Court held that the action of the respondents in unilaterally blocking the Electronic Credit Ledger of the petitioner, without following the principles of natural justice, was set aside. The Court noted that this issue was squarely covered by a previous common order of the High Court in WP.No.10390 of 2024 and batch, dated 26.06.2024. The reasoning was based on the admission by the respondents' counsel that the principles of natural justice were not followed. The ratio decidendi is that blocking of ITC under Rule 86-A must be preceded by adherence to natural justice principles. The Court reserved liberty to the respondents to proceed against the petitioner in accordance with law, and the petitioner undertook to cooperate with such proceedings. The writ petition was disposed of accordingly.

Facts

The petitioner, Rapidue Technologies Private Limited, filed a writ petition before the Telangana High Court challenging the action of the Deputy Commissioner of Central Tax (Respondent No.1) in unilaterally blocking its Input Tax Credit (ITC) amounting to Rs. 8,33,40,276/- in its Electronic Credit Ledger. This action was taken without following the principles of natural justice. The petitioner sought a declaration that the blocking of ITC was void, illegal, and arbitrary, and prayed for the unblocking of the ITC and waiver of any interest and penalty incurred due to the delay in filing monthly returns. The petition also included interim applications seeking suspension of the blocking order and permission to file returns without paying the blocked ITC.

Key Issues

1. Whether the action of Respondent No.1 in unilaterally blocking the Electronic Credit Ledger of the petitioner, without adhering to the principles of natural justice, is illegal and arbitrary, violating Articles 14, 19(1)(g), 21, and 265 of the Constitution of India and the principles of natural justice, as contemplated under Rule 86-A of the Central Goods and Services Tax Rules, 2017? Petitioner's arguments: The petitioner contended that the blocking of ITC was done without providing an opportunity of being heard, thus violating the principles of natural justice and being arbitrary and illegal. They relied on the general principles of natural justice and the constitutional provisions cited. Revenue's arguments: The respondents, represented by Ms. B. Sapna Reddy, Senior Standing Counsel for CBIC, fairly admitted that the ITC was blocked unilaterally without following the principles of natural justice. They did not present any counter-arguments against the petitioner's claim regarding the procedural impropriety.