Rule 86A of the CGST Rules – State Tax Officer has powers to block input tax credit – Sections 5 and 6 of CGST Act and MGST Act

Judgment dated 17.10.2023 in W.P.No.8630 of 2023 in Ashapura Steel Metal Vs. Union of India and others

By the Order dated 10.3.2023, the State Tax Officer had blocked the petitioner’s input tax credit of Rs.23,76,520.88 (CSGT) and equivalent amount under MGST under the CGST Act and MGST Act, respectively, on the ground that such credit was fraudulently availed in 2021 and 2022 as apparent from the records.   The petitioner filed the objections on 28.3.203. However, the State Tax Officer rejected the objections. However, such order was not communicated.  Moreover, none of the objections / contentions have been addressed on merits.

This was challenged on the grounds –

(i)                 Blocking of input tax credit under CGST Act  by the State Tax Officer is contrary to Rule 86A of the CGST Rules;

(ii)               In other words, the State Tax Officer has no authority to block credit under CGST Act and the Rules;

(iii)               The State Tax Officer did not consider the objections / contentions of the petitioner filed on 28.3.2023 while rejecting the same on 10.4.2023 and the order thereof was not communicated.

HELD that the provisions of CGST Act and the MGST Act are to be read conjunction and not in a manner which is destructive to each other.  The entire GST regime falls under both the parallel enactments.  Sections 5 and 6 of CGST Act are pari materia the provisions of Sections 5 and 6 of MGST.   Rule 86A of CGST Rules does not override the powers under Section 5 of MGST Act and is not contrary to Section 6 of the CGST Act.

However, the order rejecting the objections / contentions on 10.4.2023 did not consider the same on merits and it was not communicated to the petitioner.   As a result, the matter was remanded back.