Madras HC Directs Unblocking of ITC under Rule 86A for Lack of Written Reasons

 

In a recent landmark judgment, the Madras High Court, in the case of Tvl.J.M.Traders vs DC(ST)/ CTO Chennai WP No.1387 of 2024, has issued a significant directive regarding the blocking of Input Tax Credit (ITC) under Rule 86A.

Rule 86A empowers the Commissioner or an officer authorized by him to block the ITC in the electronic credit ledger if there is a reason to believe that the credit was fraudulently availed or the registered person was not eligible for such credit. However, the rule also implicitly requires that the reasons for such a belief be communicated in writing to the assessee.

The court emphasized the importance of due process, stating that while Rule 86A grants authorities the power to block ITC if there are reasons to believe it was fraudulently availed and such action must be accompanied by the communication of reasons in writing to the concerned assessee.

The Madras High Court found that in the case of Tvl. J.M. Traders, the authorities had failed to provide written reasons for blocking the ITC, which was a breach of the procedural requirements under Rule 86A. Consequently, the court directed the first respondent to take necessary actions to remove the block on the ITC in the electronic credit ledger pertaining to the assessee.

This ruling underscores the significance of procedural fairness in tax matters and upholds the rights of GST taxpayers to be informed and heard.

The copy of the order is as under:

 

Tvl.-J.M.-Traders-Vs-Deputy-Commissioner-ST-Madras-High-Court (1)

From,

Krishnakant Jakhotia

Mobile No:- 9422507911

Email Id:-taxtalknew@gmail.com