Case Law Details
Tvl. Guruvammal Tex Vs Assistant Commissioner (ST) – II (Madras High Court)
The Madras High Court disposed of the writ petition challenging the blocking of the petitioner’s electronic credit ledger under Rule 86A of the GST enactments by an order dated 25.03.2025. The petitioner contended that the blocking order did not contain any reasons, making it liable to be quashed, and submitted that the action had severely affected its business.
The petitioner informed the Court that a DRC-01 notice dated 23.04.2025 had subsequently been issued, to which replies had been submitted on 24.05.2025, 24.06.2025, 26.06.2025, and 01.07.2025. It was further argued that, even if an adverse order were ultimately passed, the respondents could insist only on payment of 10% of the disputed tax amount in accordance with law.
The petitioner also submitted that the DRC-01 notice was the first communication informing it that Input Tax Credit (ITC) of Rs. 43,58,856 was alleged to have been wrongly availed on supplies received from M/s. International Enterprises. According to the petitioner, the ITC was legitimately availed on the basis of genuine tax invoices issued by the supplier and was reflected in the auto-populated Form GSTR-2A.
After considering the submissions of both parties, examining Rule 86A, and taking note of the petitioner’s initial admission dated 24.05.2025 as well as its subsequent explanations and communications dated 24.06.2025, 26.06.2025, and 01.07.2025, the Court disposed of the writ petition with specific directions.
The Court directed the petitioner to deposit Rs. 5,00,000 in cash as expeditiously as possible. Upon such deposit, the electronic credit blocked pursuant to the order dated 25.03.2025 was directed to be unblocked forthwith. The Court further directed the first respondent to pass final orders on the DRC-01 notice on merits and in accordance with law, preferably within three months from the date of receipt of the order, after granting the petitioner an opportunity of personal hearing. The writ petition was disposed of, with no order as to costs, and the connected miscellaneous petitions were closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition is disposed of, after hearing the learned counsel for the petitioner and the learned Additional Government Pleader appearing for the respondents.
2. The specific case of the petitioner is that the freezing of the electronic credit ledger, purportedly, in exercise of powers under Rule 86A of the respective GST enactments, vide order dated 25.03.2025, is erroneous.
3. The learned counsel for the petitioner submits that the impugned order blocking the electronic credit ledger does not contain any reasons and therefore, the same is liable to be quashed. It is further submitted that the petitioner’s business has been severely affected on account of the said blocking. However, it is also submitted that the petitioner has been served with a notice in Form DRC-01 dated 23.04.2025, to which the petitioner has already responded by way of a reply dated 24.05.2025, followed by further replies dated 24.06.2025, 26.06.2025, and 01.07.2025.
4. It is the contention of the learned counsel for the petitioner that even assuming an adverse order is passed pursuant to the said notice, the respondents would at best be entitled to insist on payment of only 10% of the disputed tax amount, in accordance with law.
5. It is further submitted that only through the DRC-01 notice dated 23.04.2025, for the first time, the petitioner was informed that an amount of Rs.43,58,856/- had allegedly been availed as ineligible credit on supplies made by M/s.International Enterprises. The learned counsel for the petitioner contends that the credit so availed was legitimate, as it was based on genuine tax invoices issued by the said supplier and reflected in the auto-populated Form GSTR-2A.
6. Having considered the submissions of both parties and upon examining the relevant provisions of the GST enactments, particularly, Rule 86A and also taking note of the petitioner’s initial admission dated 24.05.2025, followed by subsequent explanations/resiling from the said admission through communications dated 24.06.2025, 26.06.2025 and 01.07.2025, this Court is inclined to dispose of the writ petition with the following directions:-
(i) The petitioner shall deposit a sum of Rs.5,00,000/- (Rupees Five Lakhs only) in cash, as expeditiously as possible.
(ii) Upon such deposit, the credit blocked pursuant to the impugned order dated 25.03.2025 shall be unblocked forthwith.
(iii) Since the petitioner has already submitted replies to the DRC-01 notice dated 23.04.2025, the first respondent shall endeavour to pass final orders on merits and in accordance with law, as expeditiously as possible, preferably within a period of three (3) months from the date of receipt of a copy of this order.
(iv) Needless to state, the petitioner shall be afforded an opportunity of personal hearing before passing such final orders.
No costs. Consequently, connected Miscellaneous Petitions are closed.
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