Pursuant to the enquiry initiated by the tax authorities on the one of the vendor supplying goods to the Petitioner, the electronic credit ledger of the Petitioner was blocked by the GST authorities by exercising powers under Rule 86A of the CGST Rules, 2017. The Petitioner submitted that the credit ledger was blocked without issuing any Notice citing reason for blocking of such credit. Further, it was submitted that in absence of any reason been recorded as required under Rule 86A, the impugned order blocking credit ledger cannot be sustained.
The HC disposed off the writ the petition calling upon the assistant commissioner to pass a detailed reasoned order as required under Rule 86A(3).
M/s. Aryan Tradelink vs. Union of India and others [WP No. 11581/2020(T/RES)]
GLS Comments:
It would be pertinent to note that recently a similar matter was placed before Hon’ble Gujarat HC in case of S.S. Industries vs. Union of India [C/SCA/8841/2020] wherein it was observed that the investigation by department relating to availing ITC basis the fake invoices was considered a prima facie case for the tax department to exercise the power under Rule 86A of the Rules. Further, it would be pertinent to note that the constitutional validity of the Rule 86A has also been challenged in the various jurisdictional HCs. The power granted under the provision of Rule 86A is immense and may result in the harassment of the taxpayers if not used judicially by the tax department.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
Sign up for the Newsletter