TMI Blog2023 (11) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... rt is inclined to allow the writ petition and declare the action on the part of the respondent No. 2 in blocking the ITC available to the petitioner in the electronic cash ledger to be arbitrary, bad in law and also in violation of the principles of natural justice. Therefore, the said impugned action is set aside/quashed holding it to be illegal - the matter stands remitted back to the respondent No. 2 for taking a fresh decision so far as the blockage of ITC available to the petitioner in the electronic cash ledger is concerned. Petition allowed. - HON BLE SRI JUSTICE P. SAM KOSHY AND HON BLE SRI JUSTICE N. TUKARAMJI For the Petitioner : Sri V. Siddharth Reddy, Learned Counsel (Appearing Through VC) For the Respondent-Department : Sri Dominic Fernandes, Learned Senior Standing Counsel for CBIC appearing. ORDER (PER HON BLE SRI JUSTICE P.SAM KOSHY) The present writ petition has been filed by the petitioner seeking for issuance of a Writ in the nature of Mandamus declaring the action on the part of the respondent No. 2/The Assistant Commissioner of Income Tax in blocking the Input Tax Credit (ITC) of the petitioner in the electronic cash ledger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner had made various representations and replies which were not duly considered by the authority concerned. According to the learned counsel for the petitioner, the impugned order is bad in law also for the reason that after the notice dated 07.07.2023 had been issued demanding the payment of ITC by reversing the same. There has been no show cause notice or a notice for personal appearance or any other notices issued and served upon the petitioner and in the absence of which the action would amount to be one with total denial of the principles of natural justice. 6. On the previous occasion, the learned counsel for the respondent-Department was directed to seek instructions. Today, the learned counsel did produce before this Court certain documents in respect of the action that was initiated by the authority concerned. 7. At this juncture, it would be relevant to take note of the provisions of Rules 86A of the Central Goods and Services Tax Rules, 2017, which specifically enumerates the conditions requisite for availing the benefit under Rule 86A. For ready reference, sub-clause 1 of Rule 86A is being reproduced herein under: RULE 86A- Conditions of use of amount av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of material evidence available or gathered in relation to fraudulent availment of input tax credit or ineligible input tax credit availed as per the conditions/ grounds under sub-rule (1) of rule 86A. 3.3.1 The amount of fraudulently availed or ineligible input tax credit availed by the registered person, as per the grounds mentioned in sub-rule (1) of rule 86A, shall be prima facie ascertained based on material evidence available or gathered on record. It is advised that the powers under rule 86A to disallow debit of the amount from electronic credit ledger of the registered person may be exercised by the Commissioner or the officer authorized by him, as per the monetary limits detailed in Para 3.2.1 above. The officer should apply his mind as to whether there are reasons to believe that the input tax credit availed by the registered person has either been fraudulently availed or is ineligible, as per conditions/ grounds mentioned in sub-rule (1) of rule 86A and whether disallowing such debit of electronic credit ledger of the said person is necessary for restricting him from utilizing/ passing on fraudulently availed or ineligible input tax credit to protect the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by us earlier. But, in our view, that may not be enough, given the nature of power, and what settled principles of law tell us in the matter. They would, in such a case, require this Court to read into the provisions of rule 86-A something not expressly stated therein, and so, we find that post decisional or remedial hearing would have to be granted to the person affected by blocking of his ECL. We may add that such post decisional hearing may be granted within a reasonable period of time which may not be beyond two weeks from the date of the order blocking the ECL. After such hearing is granted, the authority may proceed to confirm the order for such period as may be permissible under the rule or revoke the order, as the case may be. 18. The second pre-requisite of rule 86-A is of recording of reasons in writing. It comes with the use of the word may , which, in our opinion, needs to be construed as conveying an imperative command of the rule maker, and that means, reasons must be recorded in writing in each and every case. This is because of the fact that any order which brings to bear adverse consequences upon the person against whom the order is passed, must disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any reasons and therefore, there is no question of any reflection therein of the authority passing the order on being satisfied about the necessity of passing it. When the first requirement of Rule 86A is of, having reasons to believe and it has manifestly been not followed, the impugned order would have to be treated as erroneous in law. The second requirement regarding recording of reasons in writing is also followed in breach. In such circumstances, it can be said that the case on hand is one of an arbitrary exercise of power under Rule 86A. 12. Recently, the Hon ble Supreme Court of India vide its decision dated 13.03.2023 in the case of State of Karnataka Versus M/s Ecom Gill Coffee Trading Private Limited CIVIL APPEAL NO. 230 OF 2023 (Arising from SLP (Civil) No. 2572/2022) in paragraph Nos. 14 and 15 held as under: 14. The burden of proof as per Section 70 of the KVAT Act, 2003 was not an issue before the Delhi High Court. How and when the burden of proof can be said to have been discharged to prove the genuineness of the transactions was not the issue before the Delhi High Court. As observed hereinabove, while claiming ITC as per section 70 of the KV ..... X X X X Extracts X X X X X X X X Extracts X X X X
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