Vatsamitra Infrastructure Private Limited vs. The State Of Bihar

Held

The Court did not decide the merits of the case. Instead, it disposed of the writ application by granting liberty to the petitioner to make a request in terms of paragraph 3.4 of the CBIC guidelines. The Court directed respondent no. 2, the Joint Commissioner of State Tax, Patna Central Circle-1, to consider such a request expeditiously and pass a reasoned order after hearing the petitioner or its authorized representative. The Court emphasized that it had not gone into the merits and that respondent no. 2 should consider the matter afresh if the petitioner makes an appropriate request in accordance with the quoted guidelines. The guidelines themselves state that the Commissioner or authorized officer may examine the matter afresh and allow the use of credit if satisfied that it is no longer ineligible or wrongly availed, and that investigations should be completed at the earliest.

Facts

The petitioner, Vatsamitra Infrastructure Private Limited, filed a writ application before the Patna High Court challenging an order dated 26.12.2025, passed by the Joint Commissioner of State Tax, Patna Central Circle-1. The respondent authority debited and blocked Rs. 72 lakhs from the petitioner's Electronic Credit Ledger (ECL) under Rule 86A of the GST Rules. This action was based on the finding that the invoices purportedly issued by M/s Pennant Construction Private Limited, which were the basis for the input tax credit (ITC), were from a non-existent entity. The petitioner contended that the ITC credit in their ECL was genuine and had been arbitrarily blocked by the respondent authority.

Key Issues

1. Whether the blocking of input tax credit (ITC) amounting to Rs. 72 lakhs in the petitioner's Electronic Credit Ledger (ECL) by the Joint Commissioner of State Tax, Patna Central Circle-1, based on the allegation that the supplier was a non-existent entity, is arbitrary and illegal, violating the petitioner's right to utilize genuine ITC? Petitioner's contention: The petitioner argued that the ITC credit in their ECL is genuine and that the respondent authority acted arbitrarily in blocking and debiting the ITC amount of Rs. 72 lakhs. They relied on the guidelines issued by the Central Board of Indirect Taxes and Customs (CBIC), specifically paragraph 3.4, which provides for a mechanism to allow the debit of disallowed/restricted credit under sub-rule (2) of Rule 86A. Revenue's contention: The revenue's action was based on the investigation that the supplier, M/s Pennant Construction Private Limited, was a non-existent entity, thus rendering the ITC ineligible. The judgment does not explicitly record separate arguments from the revenue beyond the justification for their action.