Samay Alloys India Private Limited VS State Of Gujarat

In this writ application under Article 226 of the Constitution of India, the petitioners have prayed for specific reliefs from the Hon’ble Court, which include:

(i) Withdrawal of Negative Block on Credit Ledger: The petitioners seek a writ of mandamus or an order directing the respondents to immediately withdraw the negative block on their electronic credit ledger. This request is substantiated by the extract of the credit ledger annexed as Annexure-A to the application.

(ii) Interim Relief Pending Hearing: The petitioners request that, pending notice, admission, and the final hearing of the petition, the Court directs the respondents to withdraw the negative block on their electronic credit ledger immediately.

(iii) Ex Parte Interim Relief: They also request an ex parte ad interim relief in terms of their second prayer, which involves the immediate withdrawal of the negative block.

(iv) Further Reliefs: The petitioners seek any other reliefs deemed appropriate by the Court in the interest of justice.

The facts giving rise to this litigation are summarized as follows:

1. Company and Directors: The first writ applicant is a private limited company. The second writ applicant is a Director and shareholder of this company.

2. Business Activity: The company is engaged in the manufacture and sale of Mild Steel (MS).

The writ application primarily addresses the issue of the electronic credit ledger of the company, which has been negatively blocked by the respondents. The petitioners argue that this blockage is causing significant operational and financial distress to their company. They contend that the negative block is unjustified and seek immediate judicial intervention to rectify the situation. The reliefs requested are aimed at ensuring the smooth functioning of their business by restoring access to their credit ledger.

The petitioners have provided necessary documentation and extracts of their credit ledger to substantiate their claims and have urged the Court to act swiftly to prevent further harm to their business interests.

The issue at hand involves the writ applicants’ attempt to file their Goods and Services Tax (GST) return for September 2021. When they tried to do so, they found that their electronic credit ledger (ECL) had no available credit. However, the portal displayed a message indicating that their ECL was blocked by Respondent No.2. Additionally, the writ applicants discovered that a negative balance had been entered into their ECL by Respondent No.2.This negative balance presented significant problems for the writ applicants. Under normal circumstances, when filing a GST return, a business can claim input tax credit (ITC) to offset their output tax liability. However, because of the negative balance imposed by Respondent No.2, if the writ applicants were to file their September 2021 return and claim ITC, they would be required to pay an additional amount of output tax. This additional tax would correspond to the extent of the negative balance in their ECL, effectively increasing their tax burden.The writ applicants likely contested this situation on the grounds that the blockage of their ECL and the imposition of a negative balance were unjustified, thereby making it unfair for them to have to pay additional output tax. The circumstances described indicate a dispute over the management and accuracy of the ECL and the corresponding financial and administrative implications for the writ applicants under the GST Act.

The writ applicants encountered a significant issue while attempting to file their Goods and Services Tax (GST) return for September 2021. When they accessed the portal to file their return, they discovered that their electronic credit ledger (ECL) had no available credit balance. Despite this, the portal displayed a message indicating that their ECL had been blocked by Respondent No.2. Moreover, they noticed that a negative balance had been entered into their ECL by Respondent No.2.This situation created considerable difficulties for the writ applicants. Normally, when filing a GST return, businesses can claim input tax credit (ITC) to offset their output tax liability. However, due to the negative balance imposed by Respondent No.2, if the writ applicants filed their September 2021 return and claimed ITC, they would have to pay an additional amount of output tax equivalent to the negative balance in their ECL. This effectively increased their tax liability.In response to this situation, the writ applicants addressed a letter to Respondent No.2 on October 22, 2021, requesting an explanation for the blockage of their ITC. However, Respondent No.2 did not respond to this request.Faced with these circumstances and the lack of response from Respondent No.2, the writ applicants approached the Court with their application. They likely argued that the blockage of their ECL and the imposition of a negative balance were unwarranted, resulting in an unfair increase in their tax burden. This dispute highlights issues related to the management and accuracy of the ECL and the financial and administrative consequences for the writ applicants under the GST Act.

The writ applicants faced a significant issue when trying to file their Goods and Services Tax (GST) return for September 2021. Upon accessing the portal, they found that their electronic credit ledger (ECL) had no available credit. Despite this, the portal indicated that their ECL had been blocked by Respondent No.2, and a negative balance was entered into their ECL by Respondent No.2.This situation created a major problem for the writ applicants. Normally, businesses can claim input tax credit (ITC) to offset their output tax liability when filing a GST return. However, due to the negative balance imposed by Respondent No.2, filing the September 2021 return and claiming ITC would result in the writ applicants needing to pay additional output tax equivalent to the negative balance in their ECL, thereby increasing their tax burden.In response, the writ applicants sent a letter to Respondent No.2 on October 22, 2021, seeking an explanation for the ITC blockage. However, Respondent No.2 did not respond.Represented by Mr. Uchit Sheth, the writ applicants argued before the Court that they could not file their September 2021 return due to the negative block in the ledger. Mr. Sheth emphasized that this negative block would make his clients liable for additional tax without adjudication if they proceeded with filing the return. He asserted that the negative block on the ECL with a Nil balance as of the block date was beyond the jurisdiction and scope of Rule 86-A of the GST Rules.Mr. Sheth contended that Rule 86-A of the GST Rules allows blocking the debit of an amount equivalent to the available credit if it is deemed ineligible, but it does not permit imposing a negative block on future credits. He argued that the sine qua non for exercising power under Rule 86-A is the presence of an available credit balance in the ECL, not a future anticipated credit.Given these arguments, Mr. Sheth requested that the Court acknowledge the merit in their writ application, allow it, and direct Respondent No.2 to unblock the electronic credit ledger.

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