Orissa High Court Refuses to Interfere, Directs Authority to Decide Reply: ITC Blocking

Orissa High Court Refuses to Interfere, Directs Authority to Decide Reply: ITC Blocking

Introduction

The Orissa High Court has dismissed a writ petition challenging the blocking of Input Tax Credit (ITC) under Rule 86A of the CGST/OGST Rules, 2017, ruling that the petition was not maintainable given the pendency of departmental adjudication.

Factual Background

The petitioner, Transtech Solutions, a registered dealer engaged in works contract business, had its ITC worth ₹1,88,120 blocked on the grounds that its suppliers were non-existent and had issued fraudulent invoices. The petitioner argued that the suppliers had complied with all GST return requirements and submitted documents showing timely filings and full liability discharge.

Procedural Background

The department relied on a confidential enforcement report indicating that the suppliers were non-existent and that their registrations had been cancelled. The department initiated proceedings under Section 73 of the GST Act and issued a DRC-01A intimation for recovery of the blocked ITC amount.

Issues

The primary issue was whether the blocking of ITC under Rule 86A of the CGST/OGST Rules, 2017, was valid and whether the writ petition was premature and therefore maintainable.

Contentions of the Parties

Petitioner's Contentions:

• The petitioner argued that no prior notice or opportunity was granted before the ITC was blocked.
• The petitioner contended that the suppliers had complied with all GST return requirements and submitted documents showing timely filings and full liability discharge.

Respondent's Contentions:

• The department relied on a confidential enforcement report indicating that the suppliers were non-existent and that their registrations had been cancelled.
• The department contended that action under Rule 86A was valid and that the petitioner’s reply was under examination.

Reasoning & Analysis

The Chief Justice Harish Tandon and Justice Murahari Sri Raman held that the matter required a factual inquiry into whether the goods or services were actually received and whether the suppliers were legitimate, a determination best left to the competent statutory authority. The Court noted that the availability of an alternate statutory remedy and ongoing investigation rendered the writ petition premature and non-maintainable.

Implications

This decision underscores the importance of exhausting alternate statutory remedies before approaching the High Court under Articles 226 and 227 of the Constitution. The Court’s decision emphasizes that the blocking of ITC under Rule 86A is a matter that requires factual inquiry and determination by the competent statutory authority.

Outcome

The Court disposed of the petition and directed the concerned GST authority to decide the petitioner’s reply within four weeks, clarifying that any observation in the judgment would not influence the pending adjudication.