Calcutta High Court Directs Post-Decisional Hearing On ₹4.43 Crore ITC Blocking

The Calcutta High Court on 1 September directed GST authorities to grant a post-decisional personal hearing to a company whose Electronic Credit Ledger was blocked to the extent of Rs. 4.43 crore, holding that it must be given an opportunity to substantiate the genuineness of its purchases and suppliers.

Justice Smita Das De disposed of a writ petition filed by SPL Steel Processors Private Limited challenging the blocking of its Electronic Credit Ledger for the period from 1 February 2026 to 17 June 2026. The Bench held:

“However, to balance the equities and for ends of justice, the petitioner can be given further opportunity of personal hearing to substantiate its claim on the basis of documents for Financial Years 2021-22 to 2023-24 being tax period from 01.02.2026 to 17.06.2026…”

The blocking order dated 15 June 2026 was passed after the GST authorities alleged that certain suppliers were non-existent and that the input tax credit claimed by SPL Steel Processors was fraudulent or ineligible.

The company contended that all its purchases were genuine and supported by relevant documents. It argued that the blocking of its Electronic Credit Ledger was arbitrary as it had not been given an opportunity to rebut the allegations or explain the transactions before the order was passed.

It further submitted that the blocking had caused serious financial and operational difficulties and affected its ability to file returns and discharge its statutory obligations.

SPL Steel Processors relied on the Karnataka High Court's decision in K-9 Enterprises v. State of Karnataka, which was subsequently affirmed by the Supreme Court, to contend that an opportunity of hearing was required before blocking an Electronic Credit Ledger.

The State opposed the petition, contending that it was premature as the investigation had not attained finality. It submitted that the authorities had already issued a notice requiring the company to produce relevant documents, but it had failed to appear on the scheduled date.

On examining the records, the High Court found that there was prima facie no infirmity in the blocking of the Electronic Credit Ledger. It noted that the records indicated that certain suppliers were found to be non-existent at their declared premises and that their registrations had already been cancelled.

However, the Court held that SPL Steel Processors should be given a further opportunity to substantiate its claim. Applying the principles of audi alteram partem (the requirement to give a person an opportunity to be heard) and those recognised in K-9 Enterprises, the Court directed the authorities to provide a post-decisional personal hearing.

The Bench directed SPL Steel Processors to submit a comprehensive representation within two weeks, along with documents relating to its suppliers and other GST records to establish the genuineness of the transactions and seek unblocking of input tax credit amounting to Rs. 4,43,53,116. The amount comprises Rs. 2,21,76,558 towards Central Goods and Services Tax (CGST) and an equal amount towards State Goods and Services Tax (SGST).

Thereafter, the concerned GST authority has been directed to consider the representation, grant the company a personal hearing and pass a reasoned and speaking order within three weeks.

Accordingly, the High Court disposed of the writ petition with these directions.

For Petitioner: Debasish Ghosh, Lakit Baid, Sanjana Shaw and Kuldeep Das, Advocates

For Respondent: Bijitesh Mukherjee, Advocate