Page 32 - GSTL_6th August 2020_Vol 39_Part 1

J14 GST LAW TIMES [ Vol. 39
(5) Credit of the Input Tax has been availed for which the tax has not
been paid.
Blocking of credit ledger serious impact on the working of business
Blocking of the Credit Ledger is a very harsh provision and same has to
be applied in our opinion very cautiously. Blocking of the Credit Ledger results
in the payment of tax by Electronic Cash Ledger. Hence the assessee is required
to bring the additional Working Capital for the payment of tax. In this modern
competitive world, the credit ledger is blocked it may have impact the Right to
Carry Business. There could be violation of Article 19(1)(g) of the Constitution of
India.
Issue of show cause notice before blocking the credit ledger
Rule 86A of the CGST Rules, 2017 does not mandate for the issue of
show cause notice before blocking the Electronic Credit Ledger. However the
blocking of the credit ledger without giving the opportunity of being heard is
violation of natural justice.
Supreme Court in case of East India Commercial Co. Ltd., Calcutta v. Collec-
tor of Customs, Calcutta [1983 (13) E.L.T. 1342 (S.C.)], Natural justice is violated, if
proceedings are initiated without show cause notice. Whether the statute pro-
vides for a notice or not, it is incumbent upon the quasi-judicial authority to issue
a notice to the concerned persons disclosing the circumstances under which pro-
ceedings are sought to be initiated against them, otherwise principles of natural
justice are necessarily violated. [para 27]
In a writ petition filed before High Court of Delhi by Savan Retailers Pvt.
Ltd. reported in 2020 (32) G.S.T.L. J41 (Del.) - Input Tax Credit was blocked with-
out any reasons and without issuing show cause notice or granting opportunity.
High Court directed Department to examine their claim and unlock the said ITC
if the same found to be unjustified. If there is any justification for blocking, the
same to be filed within 10 days.
Unblocking of the credit ledger
Rule 86A(2) of CGST Rules, 2017
The Commissioner, or the officer authorised by him under sub-rule (1)
may, upon being satisfied that conditions for disallowing debit of electronic cred-
it ledger as above, no longer exist, allow such debit.
In view of the above condition for disallowing the debit of credit ledger
may be removed upon the satisfaction of the Commissioner. If Commissioner is
satisfied with the pleadings of the assessee he may issue such order.
Automatic release of the blocked credit of input tax
Rule 86A(3) - Such restriction shall cease to have effect after the expiry of
a period of one year from the date of imposing such restriction.
Restrictions which have been imposed on the department too which dis-
allows the use of the credit after a certain time. A credit in the ledger which has
been blocked shall be freely available after the period of one year from the date
of the order disallowing the debit from the Electronic Credit Ledger.

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GST LAW TIMES  6th August 2020  32