The Karnataka High Court has held that electronic credit ledger cannot be blocked citing enforcement authority’s reports.
The bench of Justice S.R.Krishna Kumar has observed that no pre-decisional hearing was provided/granted by the assessee before passing the order, coupled with the fact that the order invoking Section 86A of the CGST Rules by blocking of the Electronic credit ledger of the petitioner does not contain independent or cogent reasons to believe except by placing reliance upon the reports of Enforcement authority which is impermissible in law.
Background
The Electronic credit ledger of the petitioner/assessee was blocked by the orders by invoking Rule 86A of the Central Goods and Services Tax Rules, 2017 (CGST Rules).
The petitioner submitted that before passing the order, pre-decisional hearing was not provided to the petitioner nor does the order contain any reason to believe as to why it was necessary to block the Electronic credit ledger.
Case Law
K-9-Enterprises Vs. State of Karnataka
The Karnataka High Court in the case of K-9-Enterprises Vs. State of Karnataka has held that in the absence of valid nor sufficient material which constituted ‘reasons to believe’ which was available with respondents, the mandatory requirements/pre- requisites/ingredients/parameters contained in Rule 86A had not been fulfilled/satisfied by the department who were clearly not entitled to place reliance upon borrowed satisfaction of another officer and pass the impugned orders illegally and arbitrarily blocking the ECL of the appellant by invoking Rule 86A which is not only contrary to law but also the material on record and consequently, the impugned orders deserve to be quashed.
Conclusion
The court held that the concerned respondents are directed to unblock the Electronic credit ledger of the petitioner immediately upon the receipt of copy of order, so as to enable the petitioner to file returns.
Case Details
Case Title: M/S Prince Steel Versus State Of Karnataka
Case No.: Writ Petition No. 13721 Of 2024 (T-Res)
Date: 1/10/2024
Counsel For Petitioner: Bharath Kumar V.
Counsel For Respondent: Hemakumar K.
