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2024 (5) TMI 509 - TELANGANA HIGH COURTBlocking the input tax credit against the petitioners - blocking in contravention to the provisions of Rule 86 (A) of the CGST Rules 2017 - SCN was not issued - violation of principles of natural justice - HELD THAT:- The plain perusal of the impugned order under challenge in this writ petition would show that the respondents have made an negative credit of Rs. 50,06,000/- in the electronic credit ledger of the petitioner which otherwise is not permissible and what is permissible is only blocking the availing of the input tax credit to whatever is in credit of the petitioner. Taking into consideration the decision of the Division Bench of Gujarat High Court in SAMAY ALLOYS INDIA PVT. LTD. VERSUS STATE OF GUJARAT [2022 (2) TMI 843 - GUJARAT HIGH COURT] which has also been relied upon by this High Court and by this very Bench in yet another writ petition M/S. SRI KRISHNA ENTERPRISES VERSUS THE SUPERINTENDENT OF CENTRAL TAX [2023 (11) TMI 957 - TELANGANA HIGH COURT], it is found that the action on the part of the respondents in passing an order of negative credit to be contrary to Rule 86(A). In the event, if no input tax credit was available in the credit ledger, the rules does not provide for insertion of negative balance in the ledger and therefore what was permissible was only to the block the electronic credit ledger and under no circumstances could there had been an order for insertion of negative balance in the ledger. There are no hesitation in holding that the action on the part of the respondents also is in contravention to Rule 86(A) and also is in violation of the decisions rendered by the Gujarat High Court in the case of Samay Alloys India Pvt.Ltd. vs. State of Gujarat and also the decision of this Bench in SRI KRISHNA ENTERPRISES. The action on the part of the respondents is also not sustainable for the reason that blocking of the input tax credit effectively deprived the petitioner of his valuable right to discharge his liability and realize the value in monitory terms. In the event of the petitioner having wrongly availed input tax credit or have fraudulently availed the input tax credit, the right of the respondents were always open to initiate appropriate recovery proceedings under Section 73 or also under Section 74 rather than invoking Rule 86(A) when there was no input tax credit available in the credit ledger of the petitioner. As a consequence, the impugned order is set aside/quashed - petition allowed.
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