2021 (6) TMI 182 - HC - GST

Validity of blocking of credit ledger and its continuance beyond one year - Rule 86-A(3) of the CGST Rules, 2017 - HELD THAT - Without entering into the merits of the order blocking of the electronic credit ledger, in light of Rule 86-A(3), restriction in blocking of the electronic credit ledger cannot be extended beyond the period of one year from the date of imposing such restriction and accordingly, in light of blocking having been made on 21.01.2020, its continuance in the present instant is impermissible in law. Accordingly, it is declared that the action of the respondents in continuing the blocking of electronic credit ledger is set aside. - Consequential orders and restoring credit to the electronic credit ledger to be made forthwith. Petition disposed off.

Summary

Issues Involved:
Challenge to blocking of credit ledger and its continuance beyond one year.

Analysis:
The petitioner filed a writ petition challenging the blocking of the electronic credit ledger and its continuation beyond one year. The petitioner also sought to set aside the intimation by respondent No.3 and requested direction to restore the credit to the electronic credit ledger. The petitioner highlighted that the credit ledger was blocked on a specific date and emphasized the mandate under Rule 86-A(3) of the CGST Rules, 2017, which states that the blocking of the electronic credit ledger should cease to have effect after one year from the date of imposition. The petitioner argued that the continued blocking of the credit ledger prejudiced them.

The counsel for the revenue confirmed the blocking of the electronic credit ledger but could not dispute the legal contention regarding the impermissibility of continuing the blocking beyond one year as per Rule 86-A(3). The court, without delving into the merits of the initial blocking order, emphasized that as per the rule, the restriction on blocking the electronic credit ledger cannot extend beyond one year from the date of imposition. Since the blocking was initiated on a specific date, the court declared that its continuation beyond one year was impermissible under the law.

Consequently, the court set aside the action of the respondents in continuing the blocking of the electronic credit ledger and ordered the restoration of credit to the ledger immediately. However, the court clarified that the respondents were within their rights to take lawful actions in connection with assessment proceedings. The petition was disposed of accordingly, with the court ruling in favor of the petitioner and directing the restoration of the credit ledger while allowing the respondents to proceed lawfully in assessment matters.