The petitioner, engaged in the manufacturing of specialty chemicals at its factory in Tarapur, has faced significant legal challenges.
In 2017, the DGGI, Nagpur, initiated an investigation against the petitioner, focusing on their GST compliance. Concurrently, the petitioner filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), before the National Company Law Tribunal (NCLT), Mumbai. The application was admitted, and a moratorium was declared, offering temporary relief from legal actions and debt recovery.
However, Mr. Shah, representing the petitioner, informed that the National Company Law Appellate Tribunal set aside this application. Despite this setback, another IBC application against the petitioner was admitted, complicating their legal standing.
On 23rd September 2022, the DGGI issued a show cause notice alleging inadmissible Input Tax Credit (ITC) availed by the petitioner for the financial years 2017-18 to 2019-20. This notice is still pending adjudication, adding to the petitioner's legal battles.
In a significant move, the DGGI blocked an amount of Rs. 9,07,70,396/- from the petitioner's Electronic Credit Ledger and created a negative balance of Rs. 97,46,27,058/-, effectively blocking a sum of Rs. 1,06,53,97,454/-. This action severely impacted the petitioner's financial operations, prompting them to approach the court seeking relief.
Mr. Shah, representing the petitioner, argued that even if the respondents' actions were assumed to be incorrect, under Rule 86A (3) of the Central Goods and Services Tax Act, 2017, the blocking of ITC cannot extend beyond one year. He emphasized that the impugned order directing the blocking of available ITC had lapsed by operation of law, as the restriction imposed on 23rd November 2022 expired on 23rd November 2023.
Ms. Vyas, representing the respondents, attempted to justify the merits of the matter and the reasons for blocking the ITC. However, the court focused on the legal provision that the restriction ceases to have effect after one year.
Rule 86A empowers the Commissioner or an authorized officer to block the credit of input tax available in the electronic credit ledger if it is believed to be fraudulently availed or ineligible. The restriction, as per sub-rule (3), expires after one year from the date of imposition. In this case, the restriction lapsed on 23rd November 2023, rendering the blocking of ITC invalid.
The court, considering the arguments and the operation of law, ordered the restriction to have lapsed by 23rd November 2023. Consequently, the petition was disposed of, providing a semblance of relief to the petitioner.
GST Case Law Seya Industries Limited Versus The State of Maharashtra
Citatiion-2024 TAXONATION 1632 (BOMBAY)
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