The assessee is entitled to know the reasons recorded in writing, based on which the power under Rule 86-A was invoked by the authority. Such reason needs to be communicated to the assessee so as to enable the assessee to put forth his objections and pray for release of the blocking of the electronic credit ledger.
Rule 86A of the CGST rules, 2017 –– Blocking of ITC –– The appellant challenged order for blocking of the credit available in the credit ledger of the appellant by invoking Rule 86-A. The Counsel for the respondents submitted that the SCN was issued to the appellant on 17.12.2020, on the alleged ground of nonpayment of IGST on ocean freight charges; wrong/ excess availment of Input Tax Credit etc. The court observed that the power under Rule 86-A is a very drastic power conferred on the authority. Before invoking this power, the Authority should have reasons to believe that the credit of input tax available in the electronic credit ledger has been fraudulently availed or the assessee is ineligible, and in the absence any reason, which has been recorded, the invocation of power under Rule 86-A should be held to be unauthorised, illegal and without jurisdiction. The court relied upon the decision of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Limited Vs. ITO.
Held that:- The Hon’ble High Court set aside the order and directed the respondents to communicate the reasons recorded in writing before invoking the powers under Rule 86-A to the appellant, within a period of one week. The appellant is entitled to file his objections within a period of three (3) days, thereafter, and on receipt of the objections, the concerned authorities shall pass an order and if the concerned authority is satisfied with the explanation may revoke the order passed under Rules 86-A or otherwise pass a speaking order.
The assessee is entitled to know the reasons recorded in writing, based on which the power under Rule 86-A was invoked by the authority. Such reason needs to be communicated to the assessee so as to enable the assessee to put forth his objections and pray for release of the blocking of the electronic credit ledger.
Rule 86A of the CGST rules, 2017 –– Blocking of ITC –– The appellant challenged order for blocking of the credit available in the credit ledger of the appellant by invoking Rule 86-A. The Counsel for the respondents submitted that the SCN was issued to the appellant on 17.12.2020, on the alleged ground of nonpayment of IGST on ocean freight charges; wrong/ excess availment of Input Tax Credit etc. The court observed that the power under Rule 86-A is a very drastic power conferred on the authority. Before invoking this power, the Authority should have reasons to believe that the credit of input tax available in the electronic credit ledger has been fraudulently availed or the assessee is ineligible, and in the absence any reason, which has been recorded, the invocation of power under Rule 86-A should be held to be unauthorised, illegal and without jurisdiction. The court relied upon the decision of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Limited Vs. ITO.
Held that:- The Hon’ble High Court set aside the order and directed the respondents to communicate the reasons recorded in writing before invoking the powers under Rule 86-A to the appellant, within a period of one week. The appellant is entitled to file his objections within a period of three (3) days, thereafter, and on receipt of the objections, the concerned authorities shall pass an order and if the concerned authority is satisfied with the explanation may revoke the order passed under Rules 86-A or otherwise pass a speaking order.