Gauhati HC Refuses Interim Relief Against GSTIN Blocking Despite Alleged Credential Misuse

Gauhati HC Refuses Interim Relief Against GSTIN Blocking Despite Alleged Credential Misuse

Issue

Whether a taxpayer is entitled to interim relief (unblocking of GSTIN) against a liability mismatch intimation (Form GST DRC-01B) when they failed to file the mandatory electronic reply in Part B of the form, relying instead on a manual written representation to allege misuse of credentials by third parties.

Facts

• Petitioner: A Class-III contractor.

• The Trigger: The GST system detected a significant mismatch between the liability declared in GSTR-1 (outward supplies) and the tax paid in GSTR-3B for the period October–December 2024. The differential tax liability was approximately ₹29.11 lakh.

• Department Action: The department issued an intimation in Form GST DRC-01B, which blocks the filing of future GSTR-1 returns if not responded to within 7 days. Subsequently, the petitioner’s GSTIN was blocked.

• Petitioner’s Defense: The petitioner claimed that private respondents (Nos. 4 & 5) had fraudulently accessed and misused his GST credentials to generate fictitious outward supplies and avail Input Tax Credit (ITC) without his knowledge.

• Procedural Lapse: Instead of filing the specific electronic reply required in Part B of Form GST DRC-01B on the portal to explain the discrepancy, the petitioner submitted a manual written representation to the authorities denying the liability.

Decision

• The Gauhati High Court declined to grant interim relief at this stage.

• Procedural Non-Compliance: The Court observed that the petitioner failed to respond to the DRC-01B intimation in the manner prescribed by law (i.e., electronically in Part B). A manual representation does not satisfy the statutory requirement of Rule 88C, which is designed to automatically manage such mismatches.

• Disputed Facts: The Court noted that the allegations of fraud and misuse of credentials involving private parties are contested questions of fact that require adjudication and cannot be instantly accepted to grant interim relief.

• Next Steps: The Court issued notice to the respondents, specifically directing the petitioner to serve notice to the accused private parties (Respondent Nos. 4 & 5) by speed post within two days to bring them on record for further adjudication.

Key Takeaways

• Manual Replies are Insufficient for DRC-01B: Taxpayers must strictly adhere to the electronic response mechanism. For DRC-01B, a reply must be filed in Part B on the common portal. Manual letters to the officer do not prevent the automated blocking of GSTR-1.

• Fraud Allegation is Not a “Get out of Jail Free” Card: Merely alleging that credentials were misused does not automatically stay recovery or unblock a GSTIN. The taxpayer must first comply with the immediate procedural requirements (like filing the electronic explanation) while pursuing the fraud claim.

• High Threshold for Interim Relief: Courts are reluctant to intervene in automated compliance measures (like Rule 88C blocking) if the taxpayer has not exhausted the prescribed electronic remedies.