The Orissa High Court in the case of M/S. TRANSTECH SOLUTION VERSUS THE COMMISSIONER CT & GST ODISHA, BANIJYAKAR BHAWAN BUXIBAZAR, CUTTACK, THE JOINT COMMISSIONER OF STATE TAX BHUBANESWAR-I CIRCLE BHUBANESWAR vide W. P. (C) No. 13821 of 2025 dated 24.07.2025, did not enter into the merits of the petitioner’s eligibility for ITC but held that since the petitioner had filed a detailed representationseeking revocation of the ITC blocking, the authority was bound to consider and decide the same within a reasonable time. The non-consideration of such representation and continuing the blockage of ITC without hearing the petitioner is not justified. 

Facts of the case: The petitioner’s ITC of ₹1.88 lakh was blocked under Rule 86A citing transactions with alleged fake suppliers. The petitioner submitted evidence that the suppliers had valid GST registrations and filed returns. Despite representations, no hearing was granted. A subsequent DRC-01A notice was also issued for recovery.

Issue: Whether blocking of Input Tax Credit (ITC) under Rule 86A of the CGST/OGST Rules, 2017, based on allegations of non-existent suppliers, without furnishing reasons or providing opportunity of hearing, is arbitrary and violative of natural justice.

Held that: The Court observed that Rule 86A empowers an officer not below Assistant Commissioner to block ITC if there are recorded “reasons to believe” that (a) the supplier is non‑existent or not conducting business, (b) goods/services were not received, or (c) tax has not been paid. These powers must be exercised cautiously, based on rational material, and not mechanically or on mere suspicion.

The Court noted factual discrepancies between Department’s assertion and the petitioner’s documentary record. It emphasized that the authority must consider the petitioner’s explanation, weigh all materials, and reach an objective determination.

The Court declined to interfere at the writ admission stage, recognizing that the matter involved ongoing factual inquiry and assessment, and factual adjudication must be carried out by the statutory authority.

Accordingly, the Court refused to quash or set aside the blocking at this stage. Instead, it directed the Department to consider the petitioner’s reply/explanation within four weeks, and afforded an opportunity of hearing. The Court clarified that observations made are for purposes of admission stage only and will not affect the merits of Adjudication process under GST law. 

To read the complete judgment 2025 Taxo.online 1616