Case Law Details
HEC India LLP Vs Commissioner of GST and Central Excise Audit-II (Madras High Court)
GST Authority needs to communicate reasons for blocking ITC of the taxpayer
Hon’ble Madras High Court has held that the GST Authority necessarily needs to communicate reasons to the taxpayer if the taxpayer’s Input Tax Credit (ITC) is blocked.
In the present case, the Commissioner of GST and Central Excise had blocked any attempts of deduction from the electronic credit ledger of M/s HEC India LLP (Appellant) on unstated reasons by exercising its powers under Rule 86-A of the Central Goods and Services Tax Rules, 2017 (CGST Rules). As a result, without receiving any written reasons from the Commissioner of GST and Central Excise, the Appellant was prevented from receiving and utilizing its ITC. Thus, the Appellant preferred a writ petition before the Hon’ble Madras High Court and prayed for a relief that it may be allowed to deduct a certain sum from its electronic credit ledger.
The Hon’ble Madras High Court observed that Rule 86-A of the CGST Rules confers powers on the Commissioner or an officer authorized by him not below the rank of Assistant Commissioner may, for reasons to be recorded in writing, not allow debit of an amount equivalent to the credit suspected to be obtained fraudulently in electronic credit ledger for discharge of any liability under Section 49 of the Central Goods and Services Tax Act, 2017 or for claim of any refund of any unutilized amount. It was observed that the requirement of recording reasons in writing for exercising the said power and communicating the same to the Appellant was not fulfilled as no order invoking the power under Rule 86-A of the CGST Rules was communicated to the Appellant.
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