M/S. Shri Shamlaji Sales Private Limited vs. Assistant Commissioner (State Tax)

Facts

The Petitioner, a taxpayer, approached the High Court seeking a writ of mandamus to declare the blocking of its entire Input Tax Credit (ITC) amounting to Rs. 1,84,48,044 in its electronic credit ledger on February 27, 2024, as without jurisdiction and in violation of natural justice. The Petitioner also sought a direction to reverse this blocked credit. The Petitioner contended that the blocking was unilateral and done without affording an opportunity of being heard. The Respondents, represented by the Special Government Pleader for State Tax, conceded that the electronic credit ledger was indeed blocked without providing an opportunity to the Petitioner. The matter was stated to be covered by a recent order of the same High Court in a similar case.

Held

The High Court disapproved of the impugned action of blocking the Petitioner's Electronic Credit Ledger by the respondents. The Court found that the blocking was done without affording the Petitioner an opportunity of being heard, which is a violation of the principles of natural justice. Consequently, the Court set aside the impugned action. The Court explicitly reserved liberty to the respondents to proceed against the Petitioner in accordance with law, implying that any future action must adhere to due process. The Court's reasoning was based on the concession made by the Revenue and the precedent set by a previous order of the same Court in a similar writ petition. The operative direction was to set aside the blocking and dispose of the writ petition.

Key Issues

1. Whether the blocking of the Petitioner's Electronic Credit Ledger by the respondents, without affording an opportunity of being heard, is without jurisdiction and in violation of the principles of natural justice, particularly in light of Rule 86-A of the Central Goods and Services Tax Rules, 2017? Petitioner's contention: The Petitioner argued that the unilateral blocking of its ITC of Rs. 1,84,48,044 was done in contravention of Rule 86-A of the CGST Rules, 2017, and without adhering to the principles of natural justice, specifically the right to a hearing. The Petitioner relied on a recent order of the High Court in WP.No.10390 of 2024, which allegedly covered this specific issue. Revenue's contention: The learned Special Government Pleader for State Tax submitted that the Electronic Credit Ledger was indeed blocked without affording an opportunity to the Petitioner and acknowledged that the matter was covered by the aforementioned order of the High Court.