Order Date – 01 October 2024

Parties: M /s Royal Steel Vs Assistant Commissioner of Commercial Taxes    

Facts –

• The Petitioner’s, M /s Royal Steel, Electronic credit ledger (ECL) was blocked by invoking Rule 86A of the Central Goods and Services Tax Rules, 2017.
• It was alleged that before passing the impugned order, pre-decisional hearing was not provided to the petitioner nor does the impugned order contain any reason to believe as to why it was necessary to block the ECL.

Issue –

• Whether the order blocking ECL by invoking Rule 86A, without allowing pre-decisional hearing and without providing reasons to believe as to why it was necessary to block the ECL is proper?

Order –

• The Single Bench of Hon’ble High Court observed that in the instant case, no pre-decisional hearing was provided/granted by the Respondents before passing the Impugned Order. Further, the Impugned Order relied solely on reports of the Enforcement Authority without providing independent or cogent reasons to justify blocking the ECL which amounts to borrowed satisfaction, which is impermissible in law, as held by the Division Bench of the Karnataka High Court in K-9 Enterprises vs. State of Karnataka, the impugned order deserves to be quashed.
• Hence, the concerned Respondents are directed to unblock the ECL of the Petitioner. Further liberty is reserved in favour of the Respondents to proceed against the Petitioner in accordance with law and in terms of the judgment of Division Bench in K-9-Enterprises Vs. State of Karnataka.