This case involves M/s Graphic Trades Private Limited, which challenged the blocking of its Input Tax Credit (ITC) worth over ₹1.18 crore by Bihar tax authorities. The ITC was blocked after it was found that one of its suppliers, M/s TDML Services Private Limited, was non-existent at its registered address. The court did not quash the blocking order but told the petitioner to use the remedy available under tax guidelines to seek unblocking, leaving all issues open for further consideration.
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M/s Graphic Trades Private Limited vs. State of Bihar & Ors.(High Court of Patna)
Civil Writ Jurisdiction Case No. 4506 of 2025
Date: 23rd April 2025
Was the blocking of the petitioner’s Input Tax Credit (ITC) under Rule 86A of the BGST Rules, 2017, lawful, and did it comply with the requirements of recording reasons and providing an opportunity to be heard?
Petitioner (M/s Graphic Trades Pvt. Ltd.)
State (Tax Authorities)
Q1: Why was the ITC blocked?
A: The ITC was blocked because the petitioner’s supplier, TDML Services Pvt. Ltd., was found to be non-existent at its registered address, raising suspicion of fake invoicing and fraudulent ITC claims.
Q2: Did the court order the ITC to be unblocked?
A: No, the court did not order unblocking. Instead, it told the petitioner to use the remedy available under the tax guidelines to seek unblocking from the tax authority.
Q3: Was the petitioner given a chance to be heard before the ITC was blocked?
A: No pre-decisional hearing is required under Rule 86A, but the petitioner can seek a post-decisional hearing/remedy by approaching the tax authority with evidence.
Q4: What should the petitioner do next?
A: The petitioner should submit a request with supporting documents to the tax authority (respondent no. 4) for unblocking the ITC. The authority must then consider and decide the request promptly.
Q5: What legal principles did the court rely on?
A: The court relied on Rule 86A of the BGST/CGST Rules, 2017, and the judgments in Samay Alloys India Pvt. Ltd. and Dee Vee Projects Ltd., which require that blocking ITC must be based on objective material and reasons must be recorded, but a pre-decisional hearing is not mandatory.
Q6: Is the blocking of ITC permanent?
A: No, the blocking is an interim measure and can last up to one year. The petitioner can seek unblocking if they provide satisfactory evidence.