Introduction

The power to block Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework is a potent tool granted to revenue authorities to prevent revenue leakage. However, this power is often a subject of contention when exercised without a clear path toward dispute resolution. A recent ruling by the Hon'ble Calcutta High Court has clarified the limitations of this power, specifically addressing whether a Proper Officer can block an assessee's Electronic Credit Ledger (ECL) while simultaneously refusing to adjudicate the alleged violation.

In the matter of Gopal Metal Stores And Anr. Vs Assistant Commissioner of State Tax, the High Court dealt with a peculiar scenario where the GST department blocked the credit ledger but explicitly stated that the violation was "not suitable for adjudication." This article analyzes the judgment, the interpretation of Rule 86A, and the mandatory requirement for time-bound adjudication proceedings.

Case Background and Facts

The writ petition was filed by the assessee challenging an order dated June 3, 2025, issued by the Assistant Commissioner of State Tax. The primary grievance of the assessee was the rejection of their request to unblock the ECL and the refusal of the authorities to initiate adjudication proceedings.

The Allegations

The Proper Officer, in the impugned order, alleged that the assessee had engaged in fraudulent practices. Specifically, the officer observed that the assessee had availed ITC based on "mere paper work without any involvement of goods." Furthermore, it was alleged that this credit was subsequently passed on to beneficiaries without any actual supply of underlying goods—a practice commonly referred to as "bill trading" in GST parlance.