Lazard Infrastructure LLP Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court)
Summary: Karnataka High Court allowed the writ petition filed by M/s Lazard Infrastructure LLP challenging the blocking of Input Tax Credit [ITC] amounting to Rs.3,81,407/-. The petitioner, a Limited Liability Partnership engaged in providing construction services to different industrial establishments, produced screenshots of the portal to contend that its ITC had been blocked without any notice or pre-decisional hearing. The learned High Court Government Pleader appearing for the respondent did not dispute that no intimation regarding the possibility of blocking ITC had been issued to the petitioner and that no pre-decisional hearing had been extended.
The respondent, however, placed on record a communication addressed by the Central GST Authorities stating that the petitioner had been identified as one of the entities which had received services from a non-existent entity and that action was required to ensure that suppliers and recipients did not take advantage of ITC. The High Court observed that the communication issued by the Central GST Authorities was only to act as fit upon verification. Since the decision to block ITC of Rs.3,81,407/- was admittedly taken without intimation or a pre-decisional hearing, the Court found reason to interfere. The Court directed the respondent to immediately unblock the ITC of Rs.3,81,407/- upon receipt of a certified copy of the order.
However, the direction was expressly made without prejudice to the respondent’s right to cause intimation and decide on blocking ITC after extending a pre-decisional hearing, as repeatedly emphasized by the Court. The petition was accordingly allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner is a Limited Liability Partnership engaged in providing construction services to the different industrial establishments, and the petitioner’s grievance is with the decision to block Input Tax Credit [ITC] for a value of Rs.3,81,407/-. The petitioner has produced screenshots of the portal [Annexure – D] to contend that its ITC for the afore value is blocked without any notice or pre-decisional hearing. Mr. Hemant Venkatray Pai, the learned counsel who appears for Ms. Lochana S. Babu who is on record for the petitioner, argues for interference emphasizing the afore.
Ms. Jyoti M. Maradi, a learned High Court Government Pleader, who accepts notice for the respondent cannot dispute that the petitioner is not issued with any Intimation of the possibility of ITC block or that the petitioner is not extended pre-decisional hearing, but the learned High Court Government Pleader places on record a Communication addressed by the Central GST Authorities to contend that the petitioner is identified as one of those entities which has received services from a non-existent entity and action must be taken to ensure that both the suppliers and the recipients do not take advantage of ITC.
If the learned High Court Government Pleader cannot dispute that the decision to block the petitioner’s ITC for the value of Rs.3,81,407/- is without intimation or pre-decisional hearing, there will be reason for interference. Further, this Court, on perusal of the Communication addressed by the Central GST authorities, must observe that the Communication is only to act as fit upon verification. This Court, in the circumstances, must interfere directing the respondent to unblock the blocked ITC but without prejudice to cause intimation and decide on blocking ITC after extending a pre-decisional hearing as repeatedly emphasized by this Court. In the light of the afore, the following.
ORDER
[A] The petition is allowed.
[B] The respondent, immediately upon receipt of a certified copy of this order, is directed to unblock the ITC for a value of Rs.3,81,407/- but without prejudice to begin the proceedings as observed.
