The Delhi High Court in the case of SHRI SAI RAM ENTERPRISES VERSUS PR. ADG, DGGI, GURUGRAM & ANR. vide Order no. W. P. (C) 5438/2025 and CMAPPL No. 24762/2025 & 24763/2025 dated 28.04.2025, has reaffirmed the legal position that in accordance with the provisions of Rule 86A of the CGST Rules. 2017, Blocking of ITC cannot extend beyond one year from the date such restriction was imposed.

Facts of the Case:  In this case, the petitioner challenged the continued blocking of Input Tax Credit (ITC) amounting to ₹3,91,23,722/- which had been blocked on 15th January 2024 by the DGGI, Gurugram. It was argued that in accordance with the provisions of Rule 86A(3) of the CGST Rules, 2017, ITC blocking cannot exceed one year. Despite the lapse of more than one year i.e. April. 2025, the ITC continues to remain blocked. The Petitioner placed reliance on the judgment in the case of Best Crop Science Pvt. Ltd. vs Pr. Commissioner, CGST, where similar credit blocking was held to be illegal after expiry of the one-year period.

However, the department argued that ITC was blocked based on the allegation that the petitioner is a “non-existing firm”. 

Held that: The High Court in the light of the statutory limit under Rule 86A(3) held that the blocking of ITC must cease after one year. The ITC blockage must be lifted since more than one year has elapsed from the date of restriction. The Court clarified that this direction is without prejudice to any further lawful proceedings or adjudication. 

Relevant Extract of Legal Provisions of Rule 86 for reference –

[Rule 86A : Conditions of use of amount available in electronic credit ledger

xxxxxx

(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.]”