K-9-ENTERPRISES Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The petitioners in these writ petitions have assailed the orders passed by respondent no.2 blocking their Input Tax Credit (ITC) available in their Electronic Credit Ledger by exercising the powers under Rule 86A of the Central Goods and Services Tax Rules, 2017 (for short, 'the Rules of 2017').

(2.) The petitioners claim that they are registered under the Karnataka Goods and Services Tax Act, 2017 (for short, 'the Act of 2017') and they are dealing with lead, lead scrap and other ancillary business related to lead and lead scrap. According to the petitioners, they have been purchasing the goods from the customers/dealers registered under the Act of 2017 and have been complying with the necessary Rules and Regulations governing the business under the GST Regime. The petitioners claim that they have purchased goods from the persons who are registered under the Act of 2017 and there is no fraud played by the petitioners in the transaction and without even affording an opportunity of hearing, respondent no.2 has abruptly issued the impugned orders blocking the ITC available in their electronic credit ledger. Being aggrieved by the same, the petitioners are before this Court.

(3.) Learned Counsel for the petitioners submits that the impugned orders have been issued in violation of the principles of natural justice. He submits that the act of respondent no.2 is violative of the rights guaranteed to the petitioners under Articles 14 & 19(1)(g) of the Constitution of India. He submits that even if the persons from whom the petitioners have purchased the goods are assumed to be fraudulent, the petitioners cannot be punished for the same unless it is proved that the petitioners have played a role in the fraud. He submits that the act of the respondents amount to negative blocking of the ITC and such a power is not provided under the Statute. In support of his arguments, learned Counsel has placed reliance on the following decisions: