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Grants Post-Decisional Hearing to SPL Steel Processors on Rs 4.43 Crore ITC Blocking
Court finds no infirmity in blocking, but orders personal hearing to
The on directed to provide a to , whose was blocked to the extent of Rs 4.43 crore under . Justice Smita Das De disposed of the writ petition, holding that while the appeared valid on records, the demanded an opportunity for the petitioner to substantiate its claims.
The GST Blocking That Sparked a Fight
SPL Steel Processors challenged an order dated by which the blocked Rs 4,43,53,116 in its for the financial years 2021-22, 2022-23, and 2023-24, covering the tax period to . The blocking was based on allegations that the company's suppliers were non-existent and that had been fraudulently availed.
The petitioner argued that all purchases were genuine and supported by documents. It claimed that the blocking was arbitrary, as no opportunity of hearing was given before the order was passed. It also pointed out that the blocking prevented it from filing returns and discharging statutory obligations, causing severe financial and operational difficulties. Relying on the 's decision in , affirmed by the in , the petitioner submitted that a was mandatory before invoking Rule 86A.
State's Stand: Investigation Yet to Attain Finality
The opposed the petition, arguing it was premature since the investigation was not complete. They noted that a notice under had been issued on , requiring the petitioner to produce relevant documents, but the petitioner failed to appear on the scheduled date. The State contended that the blocking was in consonance with Rule 86A and that there was no arbitrariness.
Court's Finding: Valid, But Hearing Required
After hearing both sides, the Court recorded that there was no infirmity in the . The records indicated that the suppliers were found non-existent at declared premises and their registrations had been cancelled. However, the Court emphasized the need to .
Quoting from the judgment, the Court stated:
"However, to balance the equities and for , the petitioner can be given further opportunity of personal hearing to substantiate its claim on the basis of documents... Principles of and the principles observed in the judgment of K-9 Enterprises (supra) requires a ."
The Court declined to set aside the but directed a structured post-decisional process.
The Roadmap for Resolution
Justice Das De directed SPL Steel Processors to file a comprehensive representation within two weeks, producing all relevant documents to verify the suppliers and demonstrate the nature of the transactions. The representation should include other related GST documents to support the unblocking of the ITC amount of Rs 4,43,53,116 (comprising CGST Rs 2,21,76,558 and SGST Rs 2,21,76,558).
Upon receipt, Respondent No. 2 (the concerned GST officer) is to consider and dispose of the representation by a within three weeks, after affording the petitioner a personal hearing. The decision must be communicated within a week thereafter. The entire exercise must be completed by .
The Court made it clear that the petitioner shall not seek unnecessary adjournments and that the respondent must decide independently, without being influenced by any observations in the order.
Implications of the Decision
The judgment reinforces that even when a under Rule 86A appears factually justified, the cannot be ignored. The post-decisional hearing granted here serves as a middle path, allowing revenue protection while giving the taxpayer a meaningful chance to contest the allegations. The decision also underscores the continued relevance of the K-9 Enterprises precedent, which mandates that blocking orders must be preceded by a hearing unless extraordinary circumstances exist.
With the petition disposed of without going into the merits, the ball is now in SPL Steel Processors' court to prove the genuineness of its claims within the tight timeline set by the High Court.
