Blocking ITC Ledger - Jurishour No. 1 Latest Tax Portal

Q: Whether blocking ITC ledger is justified without any reasoned order?

The Bombay High Court in the case of Bhansali Industries v/s Union of India has quashed the unreasoned order blocking ITC ledger citing Cyril Lasrado Judgement .

Blocking ITC ledger without any reasoned order was quashed by the Bombay High Court citing Cyril Lasrado Judgement.

The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that the credit ledger has been unblocked during the pendency of the writ petition. The order is absolutely bereft of any reason. Reasons are the live link between the mind of the decision maker and the decision. The right of appeal is rendered nugatory in absence of a reasoned order.

Background

The petitioner is a registered taxpayer. It was issued a show cause notice, denying input tax credit on the ground that the registration of the supplier has been cancelled (with retrospective effect). The petitioner replied. However, the ITC ledger came to be blocked and an order confirming the demand came to be passed.

Arguments

The petitioner contended that the challenge to the order dated 06 July 2022 need not be decided because the Petitioner’s credit ledger has been unblocked by now. Therefore, the challenge is to the impugned order dated 03 July 2023 made by the Deputy Commissioner of State Tax.

The petitioner argued that the Petitioner, after receiving the show cause notice dated 04 August 2022, filed a fairly detailed response. The Petitioner claimed that no personal hearing was given.

Conclusion – Blocking ITC Ledger

The court noted that there is hardly any discussion and in any event, there are no reasons to sustain the findings. The Petitioner had filed a fairly detailed response to the show cause notice.

The court noted that simply stating that the adjudicating officer finds that the demand or interest is recoverable does not amount to giving any reasons. Furnishing reasons is now accepted as one of the essential concomitants of the principles of natural justice and fair play.

The court stated that It is only based on reasons that the Appellate Authority can discern the basis for the decision that may be appealed against. An order bereft of reasons renders the right to appeal, which is a valuable right, nugatory.

“Reasons are regarded as the live link between the mind of the decision maker and the decision or the conclusion reached. Failure to give reasons amounts to failure of natural justice and even denial of justice. Reasons substitute subjectivity with objectivity. Reasons are indicative of the application of mind. Therefore, an unreasoned order containing only conclusions, mainly when made by a judicial or quasi-judicial authority, is unsustainable,” the court said, while remanding the matter back to the adjudicating authority.

FAQs

Whether blocking ITC ledger is justified without any reasoned order?

The Bombay High Court in the case of Bhansali Industries v/s Union of India has quashed the unreasoned order blocking ITC ledger citing Cyril Lasrado Judgement.