2021 (12) TMI 1390 - HC - GST

Blocking of the input tax credit - Constitutional validity of clause (b) of sub-rule (2) of Rule 86 of GST Rules, 2017 - time limitation for imposing restriction - main thrust of the advocate for the petitioner at this stage was that in terms of sub-rule (3) of the said Rule 86A in any case upon expiry of a period of one year from the date of imposition of restriction, the same would no longer survive - HELD THAT - In view of the statement made by the Counsel for the respondents, it is not necessary to go into the question of continuing the restriction imposed on the petitioner enjoying the input tax credit in question. If this unblocking of the tax credit is not already reflected on the GST portal in the account of the petitioner, the same shall be done forthwith. Petition disposed off.

Summary

Issues:
Blocking of input tax credit under Rule 86 of GST Rules, 2017, challenge to the vires of Rule 86A, unblocking of tax credit, notice for disallowing input tax credit claim.

Analysis:

1. Blocking of Input Tax Credit:
The petitioner's grievance centered around the blocking of input tax credit amounting to Rs. 3,43,630 by the respondent authorities under an order dated 18-3-2020, invoking clause (b) of sub-rule (2) of Rule 86 of GST Rules, 2017. The petitioner challenged the validity of this provision, emphasizing that as per sub-rule (3) of Rule 86A, any restriction imposed would cease to exist after one year from its imposition. The petitioner's counsel also cited judgments from the Karnataka and Bombay High Courts to support their argument.

2. Unblocking of Tax Credit:
The department's counsel informed the court that the blocked credit had already been unblocked, rendering the main grievance of the petitioner moot. However, the department had issued a notice disallowing a larger amount of input tax credit claimed by the petitioner, which the petitioner would have to address.

3. Decision on Continuing Restriction:
Given the department's assurance that the credit had been unblocked, the court deemed it unnecessary to delve into the issue of continuing the restriction on the petitioner's input tax credit. The court directed that if the unblocking was not reflected on the GST portal, it should be promptly rectified.

4. Withdrawal of Challenge to Rule 86A:
In light of the department's actions and statements, the petitioner's counsel chose not to pursue the challenge to the validity of Rule 86A in the petition. Consequently, the court disposed of the petition accordingly, considering the developments and observations presented during the proceedings.