BackgroundThe petitioner,  Pilcon Infrastructure Pvt. Ltd., had its ITC amounting to Rs. 13,96,220/- blocked in its Electronic Credit Ledger (ECL) by Respondent No. 2 (State Tax Authority) vide e-mail communication dated 24.07.2025.The sole reason recorded in the ECL for blocking was "Supplier found non-functioning", with a reference to attachment bearing ECL No. 20250709584828, which turned out to be an Alert Notice dated 13.06.2025 received by the Commissioner of State GST from the Directorate General of GST Intelligence (DGGI), Raipur Zonal Unit.The DGGI communication stated that  Maa Kamakhaya Trading, Surguja  was found non-operational and had allegedly passed on fraudulent ITC without supply of goods through bogus invoices to various taxpayers, including those in Uttar Pradesh. The petitioner was one such recipient listed in Annexure-A of that communication.The petitioner contended that no 'reasons to believe' were recorded in writing by Respondent No. 2 as mandatorily required under Rule 86A(1) of the U.P. GST Rules, 2017, rendering the blocking action illegal and without jurisdiction. Court Observations (Verbatim)"Once the Rule requires 'reasons to believe' to be 'recorded in writing', the jurisdiction and authority to be exercised under Rule 86A of the Rules must subscribe to that mandatory condition. Though such reasons may be recorded ex-parte against the assessee, at the same time, the requirement of the statute to record the reasons is a non-negotiable condition. It is wholly mandatory.""Reliance placed by learned Standing Counsel on the 'Reason' as mentioned in the Electronic Credit Ledger, namely, 'Supplier found non-functioning', does not fulfill the requirement of Rule 86A(1) of the Rules, to the extent it does not reflect any application of mind to reach that conclusion.""That the goods claimed to have been supplied to the petitioner by the said supplier  Maa Kamakhaya Trading, Sarguja was a bogus transaction, may not be readily inferred, merely on the generic allegation made by DGGI, Raipur Zonal Unit that that dealer had made some non-generic transactions.""When the Rules require recording of 'reasons to believe', 'in writing', there must not only exist material that may give rise to the belief necessary to be recorded by respondent no.2 but the reasons must spring from material on record/leading to the necessary belief. It necessarily involves application of mind by the competent authority, here respondent no.2, to the facts brought before it.""Even though exercise of power under Rule 86A(1) of the Rules remained ex-parte to the assessee, yet, more especially for that reason, the requirement of the statute to first record 'reasons to believe', 'in writing' must be strictly enforced on the revenue authorities.""It may not be forgotten, granting ITC and maintaining its chain is the soul of a successful GST regime. Therefore, any doubt or suspicion alone may not lead an action by the authorities to block the ITC of the assessee and disrupt the entire value addition chain and consequentially tax payments without fulfilling the mandatory requirement of law — to record 'reasons to believe', 'in writing'." Final VerdictThe blocking of ITC vide e-mail dated 24.07.2025 was set aside. The Court directed that the blocked ITC be unblocked forthwith. Liberty granted to Respondent No. 2 to take fresh action strictly in accordance with law under Rule 86A(1), if warranted. Petition allowed. No order as to costs.   

Facts:An inspection was conducted at the premises of the assesse on 08.03.2012 in relation to transactions in Indian Made Foreign Liquor and Foreign Made Foreign Liquor. Based on the inspection, a show cause notice dated 20.12.2018 proposing penalty under Section 45A of the Kerala General Sales Tax Act, 1963 was issued. The assessee challenged the notice contending that it was issued after an unreasonable delay and therefore barred by limitation.Court Decision:The Division Bench held that even though Section 45A of the Act does not prescribe any specific limitation period for initiating penalty proceedings, such proceedings must be initiated within a reasonable period of time. Referring to other provisions of the Act, the Court observed that the statute prescribes a five-year period for completion of assessments and escaped assessments, which can be treated as a reasonable benchmark.Since the inspection related to the assessment year 2011-12 and the show cause notice was issued only on 20.12.2018, the notice was issued beyond the reasonable period of five years. The Court further held that repeated notices issued by the department seeking production of records could not extend the limitation period. Accordingly, the writ appeal was allowed, the judgment of the Single Judge was set aside, and the show cause notice was quashed.Cases Referred by Court:State of Punjab & Others vs. Bhatinda District Co-operative Milk Producers Union Ltd.W.A. No. 344 of 2017 (Kerala High Court)W.P.(C) No. 2253 of 2017 (Kerala High Court)

Background. The matter pertained to CGST dues for the assessment year 2020-21. The RBI initiated the Corporate Insolvency Resolution Process against the Petitioner under the IBC on 8 October 2021, and the resolution order was made on 11 August 2023. There was nothing on record to show that the Respondent authorities, who later made the impugned order and raised the impugned demands, had intervened in the CIRP or sought any reliefs therein. Ignoring the resolution order, a show-cause notice dated 27 November 2024 was issued to the Petitioner. The Petitioner replied and objected to any demand being raised, relying on Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. [(2021) 91 GSTR 28 (SC)] and Vaibhav Goel v. DCIT [Civil Appeal No. 49 of 2022, decided 20 March 2025]. Despite the objections, the impugned order dated 25 February 2025 came to be passed, giving rise to the Petition. The Respondents, though instructions were wanting, contended that the impugned order was correctly made and that the Petitioner had an alternate and efficacious remedy of appeal.Observations of the Court. The Court observed that ordinarily it would have sustained the objection of alternate remedy, but declined to do so since the legal position stood fairly settled by the two decisions relied upon, which bound the Respondents and which they ought to have followed by discharging the show-cause notice. Reference was made to JSW Steel Limited v. Pratishtha Thakur Haritwal & Ors. [CP (C) No. 629 of 2023 in WP (C) No. 1177 of 2020], where the Supreme Court held that continuation of proceedings by the authorities even after Ghanashyam Mishra was specifically brought to their notice was contemptuous in nature, the authorities there being given the benefit of doubt only because the matter was among the first arising out of that judgment.Following Ghanashyam Mishra and M/s Monet Ispat and Energy Ltd. & Anr. v. State of Odisha & Anr. [WP (C) 1177 of 2020], the Court reiterated that once a Resolution Plan is duly approved by the adjudicating authority, the claims provided in the Plan stand frozen and bind the corporate debtor and all those claiming through it; all claims not forming part of the Plan stand extinguished on the date of approval, and no person is entitled to continue any proceeding in respect of such a claim. All dues, including statutory dues owed to the Central Government, any State Government or any local authority, if not part of the Resolution Plan, stand extinguished, and no proceedings in respect of such dues for the period prior to approval under Section 31 of the IBC can be continued. The Court also noted the holding that the 2019 amendment to Section 31 is clarificatory and declaratory, effective from the date the Code came into force, and that the respondents there were not entitled to recover any claims or debts from the corporate debtor accruing prior to the transfer date.Final verdict. Given the clear pronouncement of the Supreme Court, the Respondents were not justified in issuing the show-cause notice dated 27 November 2024 or in disposing of it by the impugned order. The proceedings post 11 August 2023 were in the teeth of the law laid down by the Supreme Court and were held to be wholly without jurisdiction. The impugned order dated 25 February 2025 was quashed and set aside, and the Rule was made absolute in those terms, without any order as to costs.

Facts The issue before the Court was whether purchasing dealers who paid tax to registered selling dealers are entitled to Input Tax Credit even if the selling dealers failed to deposit the tax with the Government. The selling dealers were registered at the time of transactions but later defaulted and their registrations were cancelled. The Delhi High Court held that the purchasing dealers were bona fide and entitled to ITC. The Revenue challenged this decision before the Supreme Court. Court Decision:The Supreme Court dismissed the appeals and upheld the High Court’s decision. It held that where transactions and invoices are genuine and the selling dealer was registered at the time of transaction, ITC cannot be denied to bona fide purchasing dealers. The Court found no reason to interfere with the grant of ITC after due verification. Cases Referred by Court:•    On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi •    Commissioner of Trade and Taxes v. Arise India Ltd.  

BackgroundThe petitioner challenged the constitutional validity of Section 16(2)(c) of the CGST Act and its corresponding Maharashtra provision. During the hearing, the Respondents pointed out that the Kerala, Patna and Madhya Pradesh High Courts had upheld the validity of the impugned provisions, while the petitioner relied upon a recent decision of the Gauhati High Court which had struck down the provision.The petitioner also challenged an order dated 28 February 2025 raising a GST demand of ₹1 crore, along with an additional ₹1 crore towards penalty and interest. The petitioner did not dispute the dues but contended that the liability should be borne by the fifth respondent. It was also submitted that the fifth respondent had already paid ₹21 lakhs towards GST liability.Court ObservationThe Court, prima facie, held that the State should not be deprived of its dues merely because of the dispute between the petitioner and the fifth respondent regarding who was liable to pay the dues. The Court was not prepared to accept that payment of ₹21 lakhs by the fifth respondent discharged the entire tax liability. If the petitioner believed that the liability was of the fifth respondent, it could initiate appropriate proceedings to recover the amount from that respondent.The Court further observed that, despite issuing Rule, the existence of conflicting decisions on the constitutional validity of the provision meant that this was not a case for granting an unconditional stay. It also noted that at least three High Courts had already upheld the constitutional validity of the impugned provision.Final VerdictThe Court issued Rule in the writ petition and also issued notice to the Attorney General for India because a provision of the Central statute was under challenge. However, it declined to grant an unconditional stay on recovery.The Court stayed recovery pursuant to the order dated 28 February 2025 subject to the petitioner depositing ₹20 lakhs in Court within six weeks from the date of uploading of the order. The stay would automatically stand vacated if the deposit and due intimation to the Respondents were not made.