Case Law Details
Guru Storage Batteries Vs State of Maharashtra (Bombay High Court)
Introduction: In a recent judgment, the Bombay High Court addressed the issue of the State Tax Officer’s authority to block the Electronic Credit Ledger (ECL) of a petitioner, Guru Storage Batteries, in the case of Guru Storage Batteries Vs. State of Maharashtra. This ruling has significant implications for businesses and their ability to claim Input Tax Credit (ITC) under the Central Goods and Services Tax (CGST) Rules, 2017. In this article, we will provide a detailed analysis of the court’s decision and its implications.
Detailed Analysis:
1. Background: The case revolved around the action taken by the State Tax Officer, Mr. Ujval Shrirampant Deshmukh, who had blocked the ECL of Guru Storage Batteries. The petitioner argued that Mr. Deshmukh, as an officer below the rank of Assistant Commissioner, did not have the authority to block the ECL under Rule 86A of the CGST Rules.
2. Rule 86A: Rule 86A of the CGST Rules specifies that the blocking of the ECL can only be carried out by the Commissioner or an officer authorized by the Commissioner, provided they are not below the rank of an Assistant Commissioner. It was contended that Mr. Deshmukh did not meet this criterion.
3. Delegation of Power: The respondents relied on a Notification dated 24/1/2020 to argue that the Commissioner had delegated the power to Mr. Deshmukh. However, the court noted that this notification pertained to the State GST Act and was not an amendment to Rule 86A. Therefore, it could not be relied upon to grant Mr. Deshmukh the authority to block the ECL under the CGST Rules.
4. Legal Precedent: The court also referred to its previous judgment in the case of Dee Vee Projects Ltd. Vs. Government of Maharashtra, where it had established the prerequisites that must be fulfilled before a blocking order could be passed. The petitioner argued that these prerequisites had not been met in the present case.
5. Court’s Decision: In light of the above considerations, the Bombay High Court quashed and set aside the action taken by respondent No.3 (Mr. Deshmukh) in blocking the Electronic Credit Ledger of the petitioner. The court affirmed that Mr. Deshmukh did not have the authority to do so under the CGST Rules, and the Notification dated 24/01/2020 could not alter this fact.
Conclusion: The judgment in the case of Guru Storage Batteries Vs. State of Maharashtra serves as an important precedent regarding the authority of State Tax Officers to block Electronic Credit Ledgers. The court’s decision reaffirms that such blocking can only be carried out by officers meeting specific rank criteria as per Rule 86A of the CGST Rules. This ruling provides clarity for businesses seeking to claim Input Tax Credit and underscores the importance of adhering to legal provisions in GST matters. Businesses should stay informed about such legal developments to ensure compliance with tax regulations.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Rule. Rule made returnable forthwith. Heard finally with the consent of learned counsel for the parties.
2. The petition questions the action on the part of the respondent No.3 in blocking the Electronic Credit Ledger of the petitioner. On 14/09/2022, after hearing the learned counsel for the petitioner, this Court had passed the following order.
“1. Heard learned counsel for the petitioner.
3. The contention is that blocking of the Electronic Credit Ledger (ECL) has been done by one Mr. Ujval Shrirampant Deshmukh, State Tax Officer, Kamptee, as per the impugned communication at page No.16 of the petition and that it cannot be done by State Tax Officer being an Officer below the rank of Assistant Commissioner. He submits that under Rule 86A of the Central Goods and Services Tax Rules, 2017, such blocking can be done either by the Commissioner or any Officer authorised by the Commissioner, who is not below the rank of an Assistant Commissioner. He further submits that prerequisites before blocking order is passed, as highlighted in paragraph No.32 of the judgment of this Court in the case of Dee Vee Projects Ltd. Vs. Government of Maharashtra and ors. reported in 2022(2) Bom. C. R. 239 have also not been fulfilled in the present case, at least as seen from the impugned communication. He further submits that now, illegal notices of recovery are also being issued by the respondents.
4. The points raised by the learned counsel for the petitioner require consideration by this Court although, much of the law in relation to them has already been settled by this Court in the case of Dee Vee Projects Ltd. Vs. Government of Maharashtra and ors.(supra). Therefore, issue notice for final disposal at admission stage to the respondents, returnable after three weeks.
5. Learned Additional Government Pleader waives service of notice for respondent Nos.1 to 3.
6. Meanwhile, having considered the submissions made across the bar, we direct that there shall be stay to the effect and operation of the impugned communication until further orders. We further direct that the ECL be unblocked without any further delay.”
7. It is not in dispute that the Electronic Credit Ledger has been blocked by respondent No.3. A perusal of Rule 86A of the Central Goods and Services Tax Rules, 2017, indicates that such a blocking can be done by the Commissioner or an officer authorized by him in this behalf, not below the rank of Assistant Commissioner. Admittedly, the respondent No.3 does not fall within that category and is an Officer of the rank below that of the Assistant Commissioner. Though the Notification dated 24/1/2020 has been relied upon to contend that the power has now been delegated by the Commissioner to the respondent No.3 (page 104), the same is under the State GST Act, whereas Rule 86-A of the aforesaid Act would contemplate a delegation by way of amendment to the Rule. The Notification dated 24/01/2020, would be of no assistance to the respondents. In that view of the matter the action on behalf of the respondent No.3 in blocking the Electronic Credit Ledger of the petitioner cannot be sustained and the same is hereby quashed and set aside. The petition is allowed in the above terms. No costs.
Rule is made absolute in the above terms.
