The Andhra Pradesh High Court while commenting that technology, instead of assisting the cause of justice, is actually hindering it, directed the GST Dept. to ensure absence of space constraint, in recording reasons at GST portal.
The bench of Justice R. Raghunandan Rao and Justice Maheswara Rao Kuncheam has observed that the system, in the GST portal, does not provide enough space to set out elaborate reasons. Due to this difficulty, the basic reason was set out and the subsequent communications gave more elaborate reasons. The reasons set out in the GST portal, barely pass muster.
The bench said that it is time that the authorities take note of this fact, and made necessary changes to ensure that there is no space constraint, in the recording of reasons, passed in the GST portal.
The petitioner/assessee, who is registered, under the Goods and Services Tax Act 2017, had been paying its taxes, either by way of payment of cash or by utilizing the input tax credit, which is available in its electronic credit ledger.
The department had blocked the electronic credit ledger of the petitioner to an extent of Rs.19,73,299/-, by invoking Rule-86A of the Central Goods & Services Tax Rules, 2017.
Rule-86A of the Rules, 2017, permits blocking of credit, which is actually available in the electronic credit ledger.
The petitioner submitted that there was no input tax credit available in the electronic credit ledger of the petitioner, as on the date of the blocking order and consequently, Rule-86A of the Rules, 2017, could not have been invoked.
The power, under Rule-86A of the Rules, 2017, cannot be used in a routine manner, and it is an extraordinary power granted for protection of revenue. This would require the authority, exercising such power, to look at the past conduct of the petitioner, including the payment of taxes, made by the petitioner.
The petitioner contended that the exercise of power under Rule 86A was intimated to the petitioner, through the portal of the respondents. Since there is a physical limit on the reasons that can be set out in the said portal, a brief explanation was set out in the portal. Subsequently, a detailed note setting out the details of the fake entities etc., was sent to the petitioner. No reasons have been set out or that proper reasons have not been recorded is incorrect.
The court held that the reasons set out in the GST portal, barely pass muster.
The court while dismissing the petition, held that the scheme of Rule is to put aside such amount of input tax credit, which has been wrongfully utilized, whether it is actually available in the credit ledger or not, and to await an appropriate order of assessment and penalty, if any, either under Section 73 or Section 74 of the GST Act, read with Section 122 of the GST Act.
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Case Details
Case Title: M/s. Sugna Sponge & Power Private Limited Versus The Superintendent of Central Tax
Case No.: W.P.No.11338 of 2024
Date: 13th December, 2024
Counsel For Petitioner: P. Venkata Prasad
Counsel For Respondent: Santhi Chandra
