A show-cause notice is mandatory before blocking Input Tax Credit under Rule 86A pursuant to the provisions of Section 74 in the Odisha Goods and Services Tax Act, 2017.

Judgment :

ARINDAM SINHA, J.

1. Mr. Patnaik, learned advocate appears on behalf of petitioner and submits, communications on blocking of Input Tax Credit (ITC), entitlement, of his client are all disclosed as annexure-1 series. They are impugned. At the outset, he refers us to our judgment dated 10^th September, 2024 in WP(C) no.22157 of 2024 ( M/s. Atulya Minerals, Jurudi, Jajang, Keonjhar v. Commissioner of State Tax, Commissionerate of CT and GST, Lok Seva Bhwan, Cantonment Road, Cuttack and others ) to submit, his contention relates to sub-rule(1) under rule 86A in Odisha Goods and Services Tax Rules, 2017. It was not under consideration in said judgment.

2. He draws attention to section 74 in Odisha Goods and Services Tax Act, 2017. Sub-section(1) provides, inter alia, for determination of tax on ITC wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts. The provision requires revenue to issue show-cause as to why the dealer should not pay the amounts specified in the notice along with, inter alia, interest. Rule 86A, therefore, must follow the provision, for mandatory issuance of show-cause notice. Impugned communications are straightway intimations on blocking of ITC without the authority having earlier issued show-cause notices in respect thereof. He submits further, there has to be show-cause notice issued under section 74, for determination of the tax, after which there can be blocking.

3. He draws attention to his client’s letter dated 16^th August, 2024 in seeking to demonstrate that after availing ITC, allegedly wrongfully, there was available ITC amounting to Rs. 25,23,498/-, as acknowledged by the authority on letter dated 2^nd September, 2024. In the letter, it was also said that the available ITC, amounting to Rs. 25,23,498/- was thereby blocked under rule 86A. However, what was actually done is, without determination, the available ITC appropriated to show negative balance ITC of Rs. 52,50,376/- . This figure is shown in the electronic ledger and as a result his client is unable to file GST return since April, 2024. He seeks interference.

4. Mr. Mishra, learned advocate, Standing Counsel appears on behalf of revenue and submits, rule 86A does not correspond to section 74. Rule 142 does. Blocking under rule 86A is an interim arrangement and has nothing to do with determination under section 74. Recovery of tax is provided for under section 79. It comes after the determination is made. He opposes the writ petition.

5. Rule 86A provides for blocking of available input credit. Section 74 deals with determination of tax, inter alia, on wrongfully availing ITC. Thus we see an essential difference between section 74 operating in a field where ITC has already been availed of and rule 86A, operating where there is available ITC. In the circumstances, requirement under section 74 for issuance of show- cause notice cannot be implied as mandate of pre-condition for blocking under rule 86A.

6. Revenue is required to answer in uploading information in the electronic ledger to show that petitioner has negative ITC. This they can by demonstrating such an entry can be made in the electronic ledger, as provided in the Act or the Rules. The negative entry implies action taken on recovery. Petitioner is before us because there has been blocking of his available ITC, the availed part of it alleged by revenue to be wrongful.

7. On query from Court Mr. Mishra submits, there is no provision enabling negative entry in electronic ledger regarding ITC in respect of a registered dealer. Revenue will cause correction by uploading correct figu