Vinayak Metal and Chemicals Vs State of Jharkhand (Jharkhand High Court)
The Hon’ble Jharkhand High Court in M/s Vinayak Metal and Chemicals & Ors. v. the State of Jharkhand & Ors. [W.P.(T) No. 3022 of 2020 dated November 14, 2022] quashed and set aside the orders blocking Electronic Credit Ledger (“ECL”) of the assessee without providing an opportunity of personal hearing. Permitted the assessee to file a revised Form GST TRAN-1, and further directed the Revenue Department that, in case the assessee fails to file a revised Form GST TRAN-1, it can initiate fresh proceeding after issuance of a proper Show Cause Notice (“SCN”) in accordance with law.
Facts:
M/s Vinayak Metal and Chemicals (“the Petitioner”) is engaged in trading of Iron & Steel, Coal and Salt and was registered dealers under the Value Added Tax (“VAT”). The Petitioner furnished its Returns for the period from April, 2017 to June, 2017 and declared an amount of INR 84,16,555.73/- as excess Input Tax Credit (“ITC”) to be carried forward to the Goods and Services Tax (“GST”) regime. Subsequently, the Petitioner submitted its Form GST TRAN-1 for claiming the ITC to be carry forward to GST regime. However, the Petitioner made a mistake and claimed transactional ITC for an amount of INR 69,16,555.73/-, in addition, the Petitioner claimed an amount of INR 15,41,522/- as input towards goods held in stock.
Consequently, the Petitioner requested to revise its Form GST TRAN-1, but the same was not allowed and a Summary SCN was issued (“the Impugned Summary SCN”) in terms of Form GST DRC-01 read with Rule 142 (1) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) informing the Petitioner about initiation of proceedings for utilization of excess ITC. However, without providing any information to the Petitioner, an amount of INR 16,36,000/- was blocked from the ECL on May 4, 2018 and a Summary Order under GST DRC-07 (“the Impugned Order”), exercising power under Rule 142 (5) of the CGST Rules was issued without making available the copy of the Impugned Order to the Petitioner.
The Petitioner raised an objection for the same on March 16, 2020 concerning less ITC claimed and blocking of ITC, on which, the Revenue Department (‘the Respondent”) stated that the ITC was blocked in terms of Rule 86A of the CGST Rules and the alternative remedy of appeal is available under Section 107(1) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
Being aggrieved, this petition has been filed by the Petitioner in relation to non-compliance of the statutory provision relating to service of SCN in terms of Form GST DRC-01 before blocking /debiting of the ECL of the Petitioner.
Issue:
Whether the blocking of ECL of the Petitioner is violating the principles of natural justice?
Held:
The Hon’ble Jharkhand High Court in W.P.(T) No. 3022 of 2020 held as under:
