Prasanna Kr. Thakkar vs. Dir. Dir. Gen. Of Goods And Services Tax Intelligence And Ors.

Held

The Court decided to dispose of the appeal and the writ petition with specific directions. Regarding the alleged recovery of tax without an order under Section 74(9) and the blocking of the ITC ledger, the Court directed the respondent department to issue a show cause notice to the appellant within 15 days of receiving the order's server copy. The appellant was to be given at least 10 days from receipt of the notice to file a reply. Subsequently, the show cause notice was to be adjudicated, and a speaking order passed on merits. Until this process was completed, the department was restrained from initiating any coercive action against the appellant. The Court noted that the issue of the blocked ITC ledger was an independent matter and not to be considered in the present writ petition, granting the appellant liberty to pursue remedies separately. The ratio is that while tax recovery and ITC blocking require adherence to due process, including proper show cause notices and reasoned orders, the High Court can direct the issuance of such notices and refrain from coercive action pending adjudication, while separating distinct issues for separate remedies.

Facts

The appellant, Prasanna Kumar Thakkar, filed an intra-Court appeal against an order dated November 16, 2021, which denied his prayer for an interim order in a writ petition. The appellant's primary grievance was that the respondents, including the Director of the Directorate General of Goods and Services Tax Intelligence, Kolkata Zonal Unit, allegedly recovered tax without a formal order under Section 74(9) of the CGST Act, 2017, and blocked his Input Tax Credit (ITC) ledger without prior intimation. The appellant stated he did not press the prayer for a declaration that Sections 16(2)(c) and 16(2)(d) of the CGST Act were unconstitutional. The respondents contended that the appellant voluntarily deposited Rs. 40 lakhs during an investigation and that a show cause notice was in the process of being issued.

Key Issues

1. Whether the respondents' action of recovering tax without a formal order under Section 74(9) of the CGST Act, 2017, and blocking the appellant's ITC ledger without prior intimation is arbitrary, unreasonable, and contrary to the Act? (Mixed question of law and fact, concerning Section 74(9) and principles of natural justice). Contentions: Petitioner/Appellant: Argued that tax recovery was effected without a proper order under Section 74(9) and that the ITC ledger was blocked arbitrarily and without notice, violating the provisions of the Act. Revenue/State: Contended that the appellant voluntarily deposited Rs. 40 lakhs and that a show cause notice was being prepared for issuance, implying due process was being followed.