2021 (7) TMI 127 - HC - GST

Continuous Blocking of the electronic credit ledger beyond one year - Input tax credit - fake invoices issued by non-existing firms - Rule 86(A)(1) of C.G.S.T. Rules, 2017 - HELD THAT - The continuance of blockage of petitioner s electronic credit ledger cannot continue beyond one year, the writ petition stands allowed.

Summary

Issues:
Provisional blocking of input tax credit based on fake invoices under Rule 86(A)(1) of CGST Rules, 2017. Interpretation of Rule 86(A)(3) regarding the duration of blockage of electronic credit ledger. Whether the blockage of input tax credit beyond one year is supported by law.

Analysis:
The petitioner, a Private Limited Company, had its input tax credit provisionally blocked amounting to ?1.5 crores due to alleged fraudulent availing of credit based on fake invoices issued by non-existing firms. The petitioner filed a writ petition seeking the unblocking of ?71,61,296/- in its electronic credit ledger. The respondents were asked to provide instructions on the matter, and the petitioner relied on Rule 86(A)(3) of CGST Rules, emphasizing the time limit for disallowing the debit of the electronic credit ledger under the rule.

The petitioner's counsel argued that the blockage of the input tax credit ledger was made under Rule 86(A)(1) of CGST Rules, 2017, and referred to Sub-Rule(2) and Sub-Rule(3) of Rule 86(A) in support of their contention that the blockage cannot continue beyond one year from the date of imposition. The respondents' counsel failed to provide instructions on the matter despite multiple opportunities, leading to an admission that the blockage of the electronic credit ledger beyond one year is not supported by law.

Considering the admission by the respondents that the blockage of the petitioner's electronic credit ledger cannot extend beyond one year as per Rule 86(A)(3) of CGST Rules, the writ petition was allowed. Respondent no. 1 was directed to immediately unblock the input tax credit availed by the petitioner in its electronic credit ledger. However, it was clarified that this order does not prevent the respondents from taking lawful actions against the petitioner in the future.