2025(02)LCX0186

Orissa High Court

Atulya Minerals

Versus

Commissioner of State Tax

W.P.(C) No. 1449 of 2025 decided on 03-02-2025

IN THE HIGH COURT OF ORISSA AT C

IN THE HIGH COURT OF ORISSA AT CUTTACK

W.P.(C) No.1449 of 2025

M/s. Atulya Minerals, Jurudi, Keonjhar     ….             Petitioner

                    -Versus-

Commissioner of State Tax,                    ….             Opposite Parties
Commissionerate of CT and GST,
Cuttack & Others

Advocates appeared in this case:

For Petitioner                 : Mr. Jagabandhu Sahoo, Senior Advocate
                                        Ms. Kajal Sahoo, Advocate

For Opposite Parties     : Mr. Sunil Mishra, Senior Standing Counsel

CORAM:

THE HON’BLE MR. JUSTICE ARINDAM SINHA,
ACTING CHIEF JUSTICE
AND
THE HON’BLE MR. JUSTICE M.S. SAHOO

JUDGMENT

Date of hearing and judgment: 3rd February, 2025

ARINDAM SINHA, ACJ.

1. Mr. Sahoo, learned senior advocate appears on behalf of petitioner and submits, pursuant to judgment dated 10th September, 2024 revenue made fresh order dated 27th September, 2024. His client has challenged said order inasmuch as it is alleged justification of appropriating future input tax credit as becomes available to his client.

2. He submits, rule 86A in Orissa Goods and Services Tax Rules, 2017 allows for blocking of the electronic ledger for a period of one year. Negative blocking is a device for appropriation. We by our judgment dated 10th September, 2024 in his client’s case had affirmed that an assessee can apply to satisfy the authority, during the blocking period of maximum one year to show that there is no reason to continue to block.

3. He relies on view taken by a division Bench of Telengana High Court on judgment dated 18th March, 2024 available at (2024) 18 Centax 134 (Telangana) (Laxmi Fine Chem v. Assistant Commissioner). The judgment was rendered on considering views taken by several High Courts. He relies on paragraphs 6 and 7, reproduced below.

“6. The plain perusal of the impugned order under challenge in this writ petition also would show that the respondents have made an negative credit of Rs.50,06,000/- in the electronic credit ledger of the petitioner which otherwise is not permissible and what is permissible is only blocking the availing of the input tax credit to whatever is in credit of the petitioner.

7. Taking into consideration the decision of the Division Bench of Gujarat High Court which has also been relied upon by this High Court and by this very Bench in yet another writ petition i.e., W.P.No.31039 of 2023, decided on 20.11.2023 [(2023) 13 Centax 88 (Telengana)], we find that the action on the part of the respondents in passing an order of negative credit to be contrary to Rule 86(A). In the event, if no input tax credit was available in the credit ledger, the rules does not provide for insertion of negative balance in the ledger and therefore what was permissible was only to the block the electronic credit ledger and under no circumstances could there had been an order for insertion of negative balance in the ledger. If there is a credit balance available, then the authorities concerned in terms of provisions of Rule 86(A) may for reasons to be recorded in writing not allowed the credit of the said amount available equivalent to such credit. However, there is no power conferred upon the authorities for block of the credit to be availed by the petitioner in future.”

4. Mr. Mishra, learned advocate, Senior Standing Counsel appears on behalf of revenue and submits, there has been compliance with direction made in our judgment dated 10th September, 2024 (supra). He relies on our another judgment dated 23rd October, 2024 in W.P.(C) No.26298 of 2024 (M/s. Amit Metaliks Company, Sundergarh v. Joint Commissioner of State Tax, Enforcement Range, Sambalpur and others). Paragraphs 6 and 7 from the said judgment are reproduced below.

“6. Revenue is required to answer in uploading information in the electronic ledger to show that petitioner has negative ITC. This they can by demonstrating such an entry can be made in the electronic ledger, as provided in the Act or the Rules. The negative entry implies action taken on recovery. Petitioner is before us because there has been blocking of his available ITC, the availed part of it alleged by revenue to be wrongful.

7. On query from Court Mr. Mishra submits, there is no provision enabling negative entry in electronic ledger regarding ITC in respect of a registered dealer. Revenue will cause correction by uploading correct figure of available ITC. At best there can be further information uploaded in the ledger to show that the available ITC stands blocked.”

5. Laxmi Fine Chem (supra) was view taken by the Telengala High Court prior to our views came by judgments dated 10th September and 23rd October, 2024 (supra). Petitioner has not been able to demonstrate from impugned order, assertion by revenue of appropriation. On the contrary Mr. Mishra submits, report on investigation has been submitted and proceedings are to be initiated.

6. There is no necessity for us to take a view regarding appropriation in relation to negative blocking. We do see from Laxmi Fine Chem (supra) that right was reserved to revenue to initiate appropriate recovery proceedings under section 73 or also under section 74 rather than invoking rule 86A. We are in possession of submission made on behalf of revenue that investigation report has been filed. In the circumstances, nothing further is required to be said.

7. Mr. Sahoo submits, he can demonstrate that the allegation of goods not received, for blocking his client’s input tax credit with intent to appropriate and amounting to negative blocking, cannot be sustained. Impugned order purporting to justify the blocking, it is apparent that it was made without basis. In this connection, we reproduce below paragraph 5 from our judgment dated 10th September, 2024 (supra).

“5. Sub-rules (2) and (3) in rule 86A are reproduced below.

“(2) The Commissioner, or the officer authorized by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.

(3) Such restriction shall cause to have effect after the expiry of a period of one year from the date of imposing such restriction.”

(emphasis supplied)

“It appears, the commissioner or the officer duly authorized in that behalf may unblock, in the period commencing from the blocking till exipiry of one year, after which the blocking automatically stands unblocked. On query from Court Mr. Mishra submits, there is no appellate provision in the rules. Thus we find, scope for redressal has been inbuilt into the rule by sub-rule (2).”

Also, therefore, we refer to Laxmi Fine Chem (supra), paragraph 8 regarding view taken on initiation of appropriate recovery proceedings, as otherwise the blocking will automatically come to an end after a period of one year, thereby making available to the dealer to debit in the electronic ledger on availing available therein, input tax credit. Thus, the blocking serves purpose of being security for revenue on recovery.

8. The writ petition is disposed of.

( Arindam Sinha )
Acting Chief Justice

( M.S. Sahoo )
Judge