The Allahabad High Court has directed the Commissioner, State Tax, to examine whether officers have been blocking input tax credit beyond their monetary jurisdiction after a Deputy Commissioner blocked ₹1.61 crore in credit despite having authority limited to ₹1 crore.
The Bench of Justices Saumitra Dayal Singh and Swarupama Chaturvedi observed that the officer had acted despite clear restrictions on his powers and corrected the action only after the Court intervened. It directed the Commissioner to examine similar instances, take appropriate corrective measures and, where warranted, initiate disciplinary proceedings. A report must be filed within six months.
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The proceedings arose from a writ petition filed by Royal Faiz Recycling Private Limited challenging a debit entry dated September 7, 2026, through which the tax authorities blocked input tax credit in its electronic credit ledger.
The blocked amount comprised ₹52,75,961 in IGST, ₹46,43,338 in CGST and ₹62,07,583 in SGST, totalling ₹1,61,26,882. The company sought quashing of the entry and immediate restoration of access to the credit.
The action followed a search authorised on September 5 and conducted on September 7, 2026. Challenging the blocking, the company argued that neither the search documents nor the panchnama disclosed sufficient transaction details or cogent material to justify the restriction.
It also questioned the stated reason—“recipient found non-functioning”—arguing that the company’s existence as the recipient of goods was not in doubt. Separately, it relied on the instructions dated November 23, 2021, to contend that a Deputy Commissioner lacked monetary jurisdiction to block credit exceeding ₹1 crore.
At the initial hearing on September 23, 2026, the Court took serious note of the submissions. It recorded a prima facie view that the matter appeared to involve abuse of jurisdiction and reckless exercise of official power, and called for a personal affidavit from the officer concerned.
In his affidavit, Rakesh Singh, Deputy Commissioner (SIB), Ghaziabad, acknowledged that the amount blocked exceeded ₹1 crore. He described the action as a documentary error relating to jurisdiction and stated that corrective action had been initiated under Section 161 of the CGST/U.P. GST Act, 2017.
The officer informed the Court that the entire ₹1,61,26,882 had been unblocked with immediate effect on September 25, 2026. The correction was communicated through the GST portal, the taxpayer’s registered email address and registered post.
In its September 30 order, the Court treated the absence of jurisdiction as admitted. It observed that the officer had acted with knowledge of the restriction and promptly corrected the mistake only because of the earlier judicial order.
The Bench emphasised that exercising statutory jurisdiction requires self-discipline. An authority that lacks jurisdiction must not act to the detriment of the person affected.
The Court noted that the Commissioner, as the highest administrative authority under the U.P. enactment, had prescribed a monetary limit of ₹1 crore. Despite this restriction, the Deputy Commissioner proceeded to block credit exceeding ₹1.6 crore.
Although the Bench indicated that it could have examined the actual reasons for the action in greater depth and considered appropriate strictures, it declined to undertake that exercise because of its workload and time constraints. It left open the company’s right to raise a fresh challenge through an appropriate petition.
The Court directed the Commissioner, State Tax, to ascertain whether other officers had also blocked credit beyond the monetary powers assigned under the administrative instructions.
If such mistakes were being committed commonly, the Commissioner should introduce appropriate remedial measures to prevent abuse of power. If the present officer and a few others had individually disregarded the instructions, the Court expected preliminary inquiries into the circumstances of each occurrence and disciplinary proceedings wherever required.
The Commissioner must submit a report within six months, and the matter will be listed after that period.
The order places the focus on accountability for exercising powers beyond prescribed limits. While the disputed credit had already been restored, the Court required a broader examination of whether similar jurisdictional violations were affecting other taxpayers.
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