T.T. Energies vs The Assistant Commissioner (ST)

The petitioner seeks a direction to the respondent to remove the blockage of Input Tax Credit (ITC) in the Electronic Credit Ledger of the petitioner. The petitioner states that he is engaged in the business of trading in iron and steel articles and that he is a registered person under GST laws. It is further stated that the ITC of the petitioner was blocked pursuant to an inspection of the premises of two of the petitioner’s suppliers, namely, M/s. Vetrivel Traders and M/s. Shri Vaari Steels, in November 2022. By asserting that the petitioner purchased goods from the said traders in early 2022 and that such transactions are genuine, the present writ petition is filed after submitting a request letter dated 08.01.2024 to release the blocking of ITC. Learned counsel for the petitioner submits that the action of blocking ITC has prejudiced the petitioner and that the petitioner is no longer in a position to file returns by availing ITC. He also submits that the respondent has failed to act on the request for releasing the block on ITC. Mrs. K. Vasanthamala, learned Government Advocate, accepts notice on behalf of the respondent. She submits that M/s. Vetrivel Traders and M/s. Shri Vaari Steels were found to be engaging in bill trading. She also submits that the said entities obtained GST registration on the basis of fabricated documents. She points out that an intimation in Form GST DRC-01A was issued to the petitioner on 01.02.2024. The petitioner emphasizes that the transactions with the said suppliers were conducted in good faith and that the goods were received and utilized in the course of business. Despite this, the petitioner’s ITC has been blocked, causing significant operational and financial difficulties. The petitioner’s inability to avail ITC has disrupted the regular filing of GST returns and compliance with the statutory obligations under the GST regime. The petitioner argues that the actions of the respondent are arbitrary and unjust, as they have effectively penalized a bona fide purchaser for the alleged misconduct of the suppliers. The petitioner maintains that the due process of law has not been followed, as the blocking of ITC was done without proper verification and investigation into the petitioner’s transactions and records. Furthermore, the petitioner contends that the respondent’s failure to respond to the request for unblocking ITC violates the principles of natural justice and administrative fairness. The petitioner asserts that he has complied with all the necessary documentation and procedural requirements, and there is no basis for the continued blocking of ITC. The petitioner requests the court to direct the respondent to release the blocked ITC immediately, allowing the petitioner to resume normal business operations and comply with GST return filing requirements. Additionally, the petitioner seeks compensation for the financial losses incurred due to the respondent’s unwarranted actions. The petitioner stresses the importance of ITC for maintaining liquidity and financial stability in the business, arguing that the blockage of ITC has caused undue hardship and disrupted the petitioner’s business activities. In conclusion, the petitioner prays for the intervention of the court to rectify the injustice and ensure the proper application of GST laws, protecting the rights of legitimate businesses from arbitrary and discriminatory actions by the tax authorities.

In order to establish that the transactions with M/s. Vetrivel Traders and M/s. Shri Vaari Steels were genuine, the petitioner is under an obligation to produce documents to substantiate the purchase and receipt of the relevant goods. Such documents may include invoices, e-way bills, lorry receipts, delivery challans, bank statements, and similar records. The petitioner, in a communication dated 17.11.2023 to the respondent, has indicated that these documents are currently with the central authorities. Regarding the transactions with M/s. Vetrivel Traders, a communication dated 08.12.2023 indicates that the petitioner subsequently provided the necessary documents to the respondent. However, it remains unclear from the available records whether documents pertaining to purchases from M/s. Shri Vaari Steels have been submitted. Regardless, it is incumbent upon the petitioner to furnish these documents to substantiate the legitimacy of the transactions. Since the petitioner made a request on 08.01.2024 to release the blocked ITC in the Electronic Credit Ledger, it is both just and necessary for the respondent to make a timely decision regarding this request. Considering the significant impact on the petitioner’s business operations and compliance capabilities, the urgency of resolving this matter cannot be overstated. The petitioner has consistently argued that the transactions were conducted in good faith, with all procedural formalities adhered to, and that the blockage of ITC is causing severe financial and operational distress.

Furthermore, the petitioner maintains that the blocking of ITC without a thorough investigation and verification of the provided documents violates principles of natural justice. The petitioner asserts that the transactions with M/s. Vetrivel Traders and M/s. Shri Vaari Steels were legitimate business dealings, involving the actual movement of goods, evidenced by appropriate documentation. The petitioner’s ability to continue regular business operations and comply with GST return filing obligations is significantly hampered by the ITC blockage. The petitioner has expressed willingness to cooperate fully by providing any additional documentation required to prove the authenticity of the transactions. Given the circumstances, it is crucial that the respondent promptly reviews the representation dated 08.01.2024 and takes into account all documents submitted by the petitioner to establish the genuineness of the transactions.

For the reasons set forth above, this writ petition is disposed of with the directive that the respondent must consider and dispose of the petitioner’s representation dated 08.01.2024 within thirty days from the date of receipt of any additional documents from the petitioner. This consideration should be thorough, taking into account all the documents produced by the petitioner to substantiate the legitimacy of the transactions. Additionally, the petitioner is granted leave to submit any further documentation within one week from the date of receiving a copy of this order. This additional time is granted to ensure that the petitioner can comprehensively address any gaps or queries raised by the respondent, thus facilitating a fair and just resolution to the issue. The court recognizes the petitioner’s predicament and underscores the importance of a swift and fair resolution in the interest of justice. Consequently, W.P. No. 2305 of 2024 is disposed of on these terms, without any order as to costs, emphasizing the need for administrative fairness and the protection of bona fide business operations under the GST regime.

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