In M/S North End Food Marketing Pvt. Ltd. v. State of UP and 4 Others [WRIT TAX No. – 309 of 2021; dated August 31, 2021], M/s North End Food Marketing Private Limited (Petitioner) has filed a petition challenging the order dated March 26, 2021 passed by the Commissioner of Commercial Tax, U.P. (Respondent No. 3), for blocking of GST Input Tax Credit (ITC) from the Electronic Credit Ledger of the Petitioner under Rule 86-A of the SGST Rules.
The Petitioner counsel contested that the Respondent No. 3, in most arbitrary manner and without application of mind, has passed the impugned order dated March 26, 2021 in complete violation of Principles of Natural Justice.
Furthermore, it was contended by the Petitioner that the power under Section 108 of the SGST Act can be undertaken by the Revisional Authority either on his own observation or on the basis of the information provided by the Commissioner of Central Tax, if he considers that any decision or order passed by any officer junior to him is faulty, he may stay such order and after giving the person concerned an opportunity of being heard, pass such order, as he thinks just and proper including enhancing or modifying or annulling the decision or order.
As opposed to the Petitioner, the Respondent counsel submitted that on analysis, it was found that the business run by the Petitioner company was unfair as they obtained goods in large quantities without an ACTUAL supply of those goods. On this ground, the Respondent argues that the blocking of ITC was justified.
On diligent perusal of all facts and evidences, the Honorable Allahabad High Court adjudicated that the use of Rule 86A of the SGST rules was invalid and wrongly invoked by the Respondent as while exercising the revisional power, the authority has given go-bye to the procedure, that too without application of independent mind. Further, the Court opined that the intent of the legislature to accord such power under the revision with a rider is to ensure that there may not be errors in the order passed by the officer subordinate to the revisional authority and the order may not be prejudicial to the interest of revenue.