Order Date – 20 November 2023

Parties: M/s. Sri Krishna Enterprises Vs The Superintendent of Central Tax

Facts –

• The Petitioner, M/s. Sri Krishna Enterprises is a supplier of goods and is carrying on the business of sale and purchase of iron and steel scrap.
• The Department observed that the petitioner has availed irregular ITC relying upon the invoices issued to two supplying dealers, which are non-existing firms, and issued notice dated 07.07.2023. The petitioner responded to the said notice vide correspondences dated 21.07.2023, 26.10.2023 and 27.10.2023 and in addition he had also made representations to various authorities in this regard.
• Without there being any further deliberations, discussions and notice, the authority concerned have straightaway now issued the order of blocking the ITC of the petitioner on 14.08.2023.

Issue –

• Whether blocking the ITC in the electronic credit ledger without any reasons and without serving any notice or order is in violation of the principles of natural justice?

Order –

• The Divisional Bench of Hon’ble High Court observed that from the documents produced by the learned counsel for the respondent-Department, it would reveal that there is not much cogent substantial material available to show that the order/decision on the part of the authority concerned in blocking the ITC available in the electronic cash ledger of the petitioner is without primarily issuing an order in this regard or such an official communication being communicated/served upon the petitioner.
• From the records that have been placed before this Court and also on perusal of the documents would also reflect that the manner in which the authority concerned was required to record the reasons to believe was also lacking except for a vague reference in this regard in the note sheets.
• Hence the court declare the action on the part of the respondent No.2 in blocking the ITC available to the petitioner in the electronic credit ledger to be arbitrary, bad in law and also in violation of the principles of natural justice. Therefore, the said impugned action is set aside/quashed holding it to be illegal.
• The matter remitted back for taking a fresh decision.