Rajnandini Metal Ltd VS Union of India

The petitioner, a Public Limited Company involved in the manufacturing of copper wire rod and submersible winding wire, has approached the court aggrieved by the actions of the respondents in blocking its Input Tax Credit (ITC) under Rule 86A of the Central Goods and Services Tax Rules, 2017 (referred to as CGST Rules). The petitioner seeks the quashing of the order dated December 17, 2021 (referred to as Annexure P-18).

The petitioner alleges that the respondents, presumably tax authorities, blocked ITC amounting to Rs. 1.9 Crore that was available in its Electronic Credit Ledger on September 2, 2021. This action has prompted the petitioner to seek relief from the court.

As a registered entity under the Central Goods and Services Tax Act, 2017, the petitioner contends that it is entitled to claim and utilize ITC for the payment of taxes on its output supplies. However, the respondents’ decision to block this credit has adversely affected the petitioner’s financial operations and compliance with tax obligations.

The petitioner emphasizes that the blocked ITC represents a substantial amount crucial for its business operations. This obstruction has led to financial strain and disrupted the petitioner’s ability to conduct its business efficiently.

Moreover, the petitioner argues that the respondents’ action lacks justification and violates the principles of natural justice. The petitioner asserts that it was not provided with any opportunity to present its case or address any alleged discrepancies before the blocking of the ITC.

In light of these grievances, the petitioner seeks judicial intervention to quash the order issued by the respondents and to restore the blocked ITC amount. The petitioner aims to regain access to the blocked credits to alleviate the financial burden and ensure smooth business operations.

Overall, the petitioner presents a compelling case highlighting the adverse consequences of the respondents’ actions on its business and seeks legal recourse to rectify the situation and uphold its rights under the CGST Act and Rules.

The petitioner, a Public Limited Company engaged in the manufacturing of copper wire rod and submersible winding wire, filed a petition to quash an order dated December 17, 2021, wherein respondents blocked Input Tax Credit amounting to Rs.1.9 Crore in the Electronic Credit Ledger on September 2, 2021. The petitioner had previously filed representations against this action, which remained undecided, leading them to approach the court via CWP No.23917 of 2021. In response, the court directed respondent No.2 to decide on the representation within seven days, which resulted in the petitioner submitting a detailed written submission on December 10, 2021. However, respondent No.2 rejected the representation on December 17, 2021, leading the petitioner to challenge this decision in the current writ petition.

The petitioner argues, through their Senior Counsel, that the impugned order was based on a communication received from Delhi North Commissionerate, without sufficient grounds provided for initiating action against the petitioner.

The petitioner, a Public Limited Company engaged in manufacturing copper wire rod and submersible winding wire, registered under the Central Goods and Services Tax Act, 2017, has moved to the Court seeking to quash an order dated December 17, 2021 (referred to as Annexure P-18) by which the respondents blocked Input Tax Credit (ITC) amounting to Rs. 1.9 Crore in the petitioner’s Electronic Credit Ledger on September 2, 2021. The petitioner had previously filed representations objecting to this action, which remained unresolved until the petitioner approached the court via CWP No.23917 of 2021. This earlier petition led to an order on December 6, 2021, directing respondent No.2 to decide on the representation within seven days, which eventually resulted in the rejection of the petitioner’s representation by an order dated December 17, 2021.

The petitioner argues through their senior counsel that the basis for initiating action against them was a communication from the Delhi North Commissionerate indicating that one of their suppliers, M/s Bhagwati Metals, was non-existent. However, the Show Cause Notice issued to M/s Bhagwati Metals on February 5, 2021, was dropped on February 23, 2021, and the suspension of its registration was revoked. The petitioner’s contention is that since the basis for action against them was withdrawn by the respondents themselves, there was no justification for blocking the petitioner’s Input Tax Credit in September 2021. They assert that Rule 86A, under which the action was taken, is intended to secure the revenue’s interest and prevent misappropriation or fraud, but in the petitioner’s case, as a running manufacturing unit with a significant turnover, there is no risk of evasion. Denying them ITC, the petitioner argues, violates their constitutional rights under Article 19(1)(g) and Article 21 of the Constitution of India.

On the other hand, the senior standing counsel for the respondents argues that although the proceedings against M/s Bhagwati Metals were initially initiated, they were subsequently dropped. However, the respondents presumably maintain that there were grounds to justify the blocking of the petitioner’s ITC despite the withdrawal of action against the supplier.

In summary, the petitioner seeks to challenge the order blocking their Input Tax Credit, arguing that since the basis for the action against them was invalidated by the withdrawal of proceedings against their supplier, there is no legal justification for depriving them of their ITC. The respondents, however, contend that there were still valid grounds for their actions.

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