2023 (7) TMI 190 - HC - GST

Blocking the available Input Tax Credit (ITC) without any show cause notice - violation of Rule 86A of the Central Goods and Services Tax Rules, 2017 - creating a negative balance being shown in the Electronic Credit Ledger of the petitioner - authority whatsoever to make such negative balance in the Electronic Credit Ledger. HELD THAT - Rule 86A of the CGST Rules, 2017 makes a provision that reasons to be recorded in writing for not allowing debit of an amount equivalent to such credit in electronic credit ledger, for discharge of any liability under Section 49 or for claim of any refund of any unutilised amount. It is also envisaged that the Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of the electronic credit ledger no longer exist, allow such debit. In the present case the petitioner has not been furnished with any details much less reasons recorded in writing indicating in regard to the impugned action is the grievance of the petitioner. It is submitted that the impugned action on the part of the respondents is violative of the basic requirements of Rule 86A, and the same would be required to be set aside, being authority as also without jurisdiction. Matter adjourned.

Summary

Issues involved:
The issues involved in the judgment are the blocking of Input Tax Credit (ITC) without notice and creation of a negative balance in the Electronic Credit Ledger without authority.

Blocking of Input Tax Credit (ITC) without notice:
The petitioner's grievance was regarding the blocking of available Input Tax Credit (ITC) of about Rs. 9 crores without any show cause notice, which was alleged to be in violation of Rule 86A of the Central Goods and Services Tax Rules, 2017. The petitioner contended that there was no authority to create a negative balance of Rs. 97,46,27,058.00 in the Electronic Credit Ledger without proper justification. The petitioner had not been provided with any written reasons for the action taken by the respondents, which was deemed violative of the requirements of Rule 86A.

Creation of negative balance in Electronic Credit Ledger:
Rule 86A of the CGST Rules, 2017 was examined, which stipulates that reasons must be recorded in writing for disallowing debit of an amount equivalent to the credit in the electronic credit ledger for the discharge of any liability or claim of refund. The rule further allows the Commissioner or authorized officers to permit such debit if conditions for disallowance no longer exist. In this case, the petitioner argued that the respondents failed to provide any details or reasons in writing for the impugned action, which was considered a violation of Rule 86A. The petitioner requested the court to set aside the action taken by the respondents as it lacked authority and jurisdiction.

Adjourned Hearing:
The court granted an adjournment to hear the respondents on the issues raised by the petitioner. A reply affidavit was directed to be furnished by a specified date before the next hearing, allowing both parties to present their arguments effectively.