Case Details: Lead Factory Versus Assistant Commissioner of Commercial Taxes (2025) 32 Centax 98 (Kar.)
Judiciary and Counsel Details
- S.R.Krishna Kumar, J.
- Shri Surendran J.G. Thumbuchetty, Adv. for the Petitioner.
- S/Shri Aditya Vikram Bhat, AGA & Madanan Pillai, Adv. for the Respondent.
Facts of the Case
The petitioner, a registered person under the CGST Act and Karnataka GST Act, challenged the blocking of their electronic credit ledger by an order passed under Rule 86A of the CGST Rules and Karnataka GST Rules. The jurisdictional officer invoked Rule 86A based on reports from the enforcement authority, alleging that the petitioner was involved in availment of fake invoices and that the declared business premises were non-existent. The petitioner submitted that the impugned order was passed without granting any pre-decisional hearing, and it failed to disclose any independent or cogent reasons. It was contended that the authority had merely placed reliance on third-party reports without forming its own satisfaction, thus amounting to borrowed satisfaction in law. No specific material or investigation was cited in the impugned order except the generic assertion regarding the petitioner’s status as a bill trader. The matter was accordingly placed before the High Court of Karnataka.
High Court Held
The Karnataka High Court held that the blocking of the electronic credit ledger was vitiated by procedural and legal infirmities. It observed that the impugned order was a non-speaking one, unsupported by any independent reasons recorded by the jurisdictional officer under CGST. The Court emphasised that Rule 86A requires the formation of an independent reason to believe, which cannot be substituted by unverified reliance on enforcement reports. The absence of a pre-decisional hearing further violated the principles of natural justice. The Court concluded that the invocation of Rule 86A in this manner was impermissible and quashed the order.
List of Cases Cited
- K-9-Enterprises v. State of Karnataka — (2024) 23 Centax 300 (Kar.) — Referred [Para 3]
