M/S Pancham Plasto Chem vs. State Of Gujarat

Held

The Court noted that respondent No. 2 had unblocked a significant portion of the ITC, but a remainder of Rs. 1,02,468/- was still blocked. The petitioner argued that this remaining amount was blocked without proper reasons or a hearing. The Court observed that respondent No. 2 had issued a communication indicating an inclination to consider the petitioner's submitted documents and grant an opportunity for hearing. The petitioner had appeared before the authorities on 29.08.2022, and the process of hearing and consideration of the petitioner's case and documents was underway. The Court expected the authorities to arrive at an appropriate decision expeditiously, considering the facts and the petitioner's defense fully. The learned Assistant Government Pleader stated that a decision would be taken on or before 30th September, 2022. The Court disposed of the petition with these observations, without expressing any opinion on the merits, and directed that the decision regarding the unblocking of the remainder ITC should be taken without being influenced by earlier communications or grounds raised.

Facts

The petitioner, M/s Pancham Plasto Chem, a manufacturer of Master Batch colouring material, challenged the blocking of Input Tax Credit (ITC) amounting to Rs. 44,74,080/- in its electronic credit ledger by respondent No. 2, invoking Rule 86A of the Central Goods and Service Tax Act, 2017. The petitioner contended that the blocking was unjustified, done without an opportunity of hearing, and was a 'negative blocking' or futuristic action. Subsequently, the petitioner filed an affidavit stating that respondent No. 2 had unblocked ITC to the extent of Rs. 43,71,672/-, but a remaining amount of Rs. 1,02,468/- was still blocked without proper reasons or a hearing. The petitioner had also submitted a letter dated 12.08.2022 to the authority.

Key Issues

1. Whether the blocking of Input Tax Credit (ITC) to the tune of Rs. 1,02,468/- by respondent No. 2, invoking Rule 86A of the Central Goods and Service Tax Act, 2017, was justified without affording an opportunity of hearing to the petitioner? The petitioner argued that the blocking of ITC was not justified, especially the remaining Rs. 1,02,468/-, as it was done without providing an opportunity of hearing, contrary to the law laid down by this court. The petitioner relied on decisions in Samay Alloys India (P) Ltd. vs. State of Gujarat and New Nalbandh Traders vs. State of Gujarat. The revenue (State of Gujarat) did not record any specific arguments on this point in the judgment, but it was noted that respondent No. 2 had issued a communication dated 24.8.2022 reiterating its earlier stand but expressing an inclination to consider the petitioner's documents and grant an opportunity for hearing.