Blocking of ITC beyond period of one year deemed impermissible

The case revolved around the exercise of powers under Rule 86A, which allows the authorities to block ITC under certain circumstances. However, Rule 86A(3) specifies that the blocking of ITC cannot exceed a period of one year. 

The Karnataka High Court in this case ruled in favor of the petitioner, setting aside the ITC blocking due to the lapse of the one-year period prescribed under Rule 86A(3). In this case, the petitioner sought to set aside notices and orders issued by the tax authorities, specifically related to the blocking of Input Tax Credit (ITC) under Rule 86A of the CGST/IGST Rules, 2017. The petitioner challenged the notices and the order that led to the blocking of their ITC credit ledger, which had effectively restricted their ability to utilize the tax credits. The ITC was blocked on 19.05.2023, and further actions were taken to block the petitioner's credit ledger in May and June 2023. The petitioner stated that Rule 86A of the CGST/IGST Rules, 2017, allows the tax authorities to block ITC if they believe that such credit has been fraudulently availed. However, Rule 86A(3) specifies that the blocking of ITC can only last for a period of one year.  

To read the complete judgment 2024 taxo.online 1315