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2025 (1) TMI 117 - HC - GSTNegative blocking of the Electronic Credit Ledger - interpretation of Rule 86A of the CGST Rules, 2017 - HELD THAT - Though the counsel for the respondents has placed reliance on the letter dated 19.08.2024 issued to the respondents by the Directorate General of GST Intelligence, Regional Unit, Jamshedpur, to justify their action, when such action is not permitted by the Rules framed under the Act, it would be prima facie wholly without jurisdiction. Therefore, the order at Annexure 5 is kept in abeyance until further orders. Also having regard to Rule 6(2)(b) of the Jharkhand Goods and Services Tax (SGST) Rules, 2017, further proceedings before the respondents shall stand stayed. List this case on 11.12.2024.
In this case before the Jharkhand High Court, the petitioner challenged the respondents' action of blocking their Electronic Credit Ledger, which was deemed a "negative blocking." The court referenced the Gujarat High Court decision in *Samay Alloys India P. Ltd. Vs. State of Gujarat*, the Telangana High Court decision in *M/s. Laxmi Fine Chem Vs. Assistant Commissioner, Malkajgiri and others*, and the Delhi High Court decision in *M/s Jai Maa Enterprises Vs. Principal Chief Commissioner, CGST and CX, Delhi & Ors.*, which interpreted Rule 86A of the CGST Rules, 2017. These courts held that Rule 86A is not a provision for tax recovery but allows temporary measures to protect revenue interests. They further stated that if no input tax credit is available in the Electronic Credit Ledger, blocking it under Rule 86A is "wholly without jurisdiction and illegal."
The respondents relied on a letter dated 19.08.2024 from the Directorate General of GST Intelligence to justify their action. However, the court found this action "prima facie wholly without jurisdiction" since it was not permitted by the Rules. Consequently, the order blocking the ledger was kept in abeyance, and further proceedings were stayed under Rule 6(2)(b) of the Jharkhand SGST Rules, 2017. The case was scheduled for further hearing on 11.12.2024.
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