M/S Z I Enterprises vs. Assistant Commissioner Of Commercial Taxes

Held

The Court accepted the submission that the decision to unblock the ITC after the previous order in W.P.No.23956/2026 rendered the present petition infructuous. The Court noted that the petitioner's grievance was with the respondent's decision to block its ITC, and the subsequent unblocking addressed this core issue. While the respondent sought to reserve their right to initiate fresh proceedings, the Court did not make any specific observations on this point in its final order. The Court disposed of the petition based on the fact that the blocked ITC had been unblocked, effectively resolving the immediate grievance of the petitioner. The Court did not explicitly rule on the violation of natural justice in this specific order, as the unblocking made the challenge moot.

Facts

The petitioner, M/s Z I Enterprises, filed a writ petition challenging an order dated July 1, 2026, passed by the Assistant Commissioner of Commercial Taxes, which blocked its Input Tax Credit (ITC) amounting to Rs. 15,33,832. The respondent had also passed a similar order on the same date to block an additional ITC of Rs. 17,70,820. The petitioner argued that this order, like the other one concerning the Rs. 17,70,820 ITC, was passed without a pre-decisional hearing, violating principles of natural justice. The respondent acknowledged that a significant portion of the blocked ITC had been unblocked following a previous High Court order in a related writ petition.

Key Issues

1. Whether the order dated July 1, 2026, passed by the Assistant Commissioner of Commercial Taxes, blocking the petitioner's Input Tax Credit (ITC) of Rs. 15,33,832, is illegal, arbitrary, and violative of the principles of natural justice, specifically the right to a pre-decisional hearing, as contemplated under the relevant provisions of the GST Act and Rules? Petitioner's contention: The petitioner argued that the impugned order suffers from the same defect as a previously challenged order (in W.P.No.23956/2026), which was quashed by this Court for being passed without providing a pre-decisional hearing. Therefore, the present order is also vitiated on the same grounds. Respondent's contention: The respondent, through the High Court Government Pleader, submitted that following this Court's order in W.P.No.23956/2026, ITC amounting to Rs. 33,04,646, which was blocked by the impugned order and the order in the previous petition, has been unblocked. The respondent contended that this development renders the present petition infructuous but sought an observation that this unblocking should not prejudice their right to commence fresh proceedings.