BEST CROP SCIENCE PVT. LTD. THROUGH AUTHORIZED REPRESENTATIVE, SH RAGHAV AGARWAL, M/S. JAI MAA ENTERPRISES, HILBERT INNOVATIONS PVT. LTD., M/S. NDCON CONSTRUCTIONS, GNG ELECTRONICS PVT. LTD. KAY KAY OVERSEAS CORPORATION, SHRI BALAJI POLYMERS THROUGH ITS PROPRIETOR MR. ANIL KUMAR

VERSUS

PRINCIPAL COMMISSIONER, CGST COMMISSIONERATE, MEERUT AND ORS., COMMISSIONER OF CENTRAL TAX AND GST DELHI NORTH & ORS., PRINCIPAL CHIEF COMMISSIONER CGST AND CX, DELHI & ORS. COMMISSIONER OF DELHI GOODS AND SERVICE TAX & ANR., SALE TAX OFFICER OF DELHI GOODS AND SERVICE TAX AND ANOTHER. vide W. P. (C) 10980/2024 and CM Nos. 45297/2024 and 45298/2024, W. P. (C) 15380/2023 CM APPL. 61699/2023, W. P. (C) 5250/2024, W. P. (C) 5395/2024, W. P. (C) 5397/2024, W. P. (C) 6997/2024, W. P. (C) 7183/2024, W. P. (C) 9350/2024 CM APPL. 38315/2024 dated 24.09.2024

  Citation: 2024 Taxo.online 2228

The Delhi High court in this case concluded that Rule 86A of the CGST Rules allows blocking of Input Tax Credit (ITC) from the Electronic Credit Ledger (ECL) only to the extent of the ITC that is believed to be fraudulently availed or ineligible, and not beyond that. This means that the authorities cannot block an amount larger than the available ITC in the ECL at the time of the order. Blocking of negative amounts (i.e., creating a negative balance in the ECL) is not supported by Rule 86A. Authorities can only restrict the usage of the available ITC but cannot force future credits to be blocked.

Also, court stated that Orders under Rule 86A are temporary and do not require a show-cause notice, but they must be supported by valid reasoning. They cannot be used as a permanent tax recovery measure, which falls under Sections 73 and 74 of the CGST Act. impugned orders in these petitions that blocked an amount exceeding the available ITC in the ECL have been set aside.

In this case, Petitioner challenged impugned orders blocking their ITC in their Electronic Credit Ledgers beyond the available balance, resulting in a negative balance in the ECL. It was argued that Rule 86A of the CGST Rules only permits blocking ITC to the extent of credit already available in the ECL. Further, rule must be interpreted literally, and any action that blocks ITC beyond what is currently available in the ECL is unauthorized. Also, ITC in the ECL is a property of the taxpayer under Article 300A of the Constitution and cannot be restricted without explicit statutory authority

However, Revenue contended that intent behind Rule 86A is to prevent the utilization of ITC that is fraudulently availed or ineligible. Hence, the Commissioner is authorized to block an amount equivalent to the ITC in question, irrespective of whether that ITC is currently available in the ECL.

 

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