Case Details: S.A. Industries Versus Assistant Commissioner of Central Tax (2025) 32 Centax 126 (Kar.)
Judiciary and Counsel Details
- S.R.Krishna Kumar, J.
- Shri Sameer Gupta, Adv. for the Petitioner.
- Shri Jeevan J. Neeralgi, Adv. for the Respondent.
Facts of the Case
The petitioner, acting as an assessee, challenged the order blocking its electronic credit ledger under Rule 86A of the CGST Rules read with Section 16 of the CGST Act and the Karnataka GST Act. The petitioner contended that no pre-decisional hearing was provided before passing the impugned order and that the order did not contain independent or cogent reasons to believe that the conditions for blocking the ledger were satisfied. It was submitted that the jurisdictional officer under CGST had merely placed reliance on reports of the enforcement authority, constituting borrowed satisfaction.
The petitioner further submitted that only a text message was received stating that input tax credit of a certain amount was blocked, without any accompanying reasons or explanation. The issue was whether the order blocking the electronic credit ledger, passed without affording a hearing and without recording independent reasons, was sustainable, and the matter was accordingly placed before the High Court of Karnataka.
High Court Held
The High Court of Karnataka held that the order blocking the electronic credit ledger of the petitioner was unsustainable as it was passed without granting a pre-decisional hearing and without assigning independent or cogent reasons. The Court observed that reliance placed solely on the reports of the enforcement authority amounted to borrowed satisfaction, which is impermissible in law. The Court further noted that the only intimation sent was a text message stating that input tax credit of a certain amount was blocked, without issuance of a speaking order or recorded reasons. The Court held that the impugned order deserved to be quashed and directed that the electronic credit ledger of the petitioner be unblocked. The petitions were allowed in favour of the assessee.
List of Cases Cited
- K-9-Enterprises v. State of Karnataka — (2024) 23 Centax 300 (Kar.) — Referred [Para 3]
