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TMI Blog2024 (9) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... in a taxpayer s ECL - whether Rule 86A of the Rules permits the Commissioner or an officer authorized by him, to block a taxpayer s ECL (Electronic Credit Ledger) by an amount exceeding the credit available at the time of issuance of the said order?. Nature of Input Tax Credit - HELD THAT:- A brief purview of the provisions of the CGST Act clearly indicate that a taxpayer is entitled to ITC only to the extent as provided under the CGST Act and subject to the stipulated conditions being satisfied. There is no cavil that if the conditions as set out under the CGST Act are not satisfied, the registered taxpayer would not be entitled to avail and utilize the ITC in respect of supplies received by it. The right to avail and utilize the ITC is thus a statutory right, which accrues by virtue of the provisions of the CGST Act and is subject to the conditions as set out therein. This right to avail and utilize the ITC is a valuable right. It is, undeniably, an asset, which vests with a taxpayer if the taxpayer satisfies all the stipulated conditions for such entitlement. In a scheme for taxation, which provides for credit for taxes on inputs, the taxpayer would be entitled to such credit s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisionally attach a taxpayer s assets for protecting the interest of the Revenue, with the language of Rule 86A of the Rules. The powers under Sub-section (1) of Section 83 of the CGST Act and under Rule 86A of the Rules, can be exercised only if the concerned authority has reasons to believe that the conditions as stipulated in the respective provisions are satisfied. In M/s S.S. Industries v. Union of India [ 2020 (12) TMI 1120 - GUJARAT HIGH COURT ], the Gujarat High Court had also observed that the provisions of Rule 86A of the Rules are reminiscent to Section 83 of the CGST Act. Principles of interpretation of Rule 86A - HELD THAT:- If there is no credit of input tax available in the ECL, one of the necessary conditions for passing an order under Rule 86A (1) of the Rules would not be satisfied. The fact that the Commissioner (or an officer authorized by him) may have reasons to believe that in the past a taxpayer had availed and utilized ITC by debiting its ECL is not the condition precedent for passing an order under Rule 86A (1) of the Rules - The words credit of input tax available in the electronic credit ledger plainly refers to the credit, which is at the given point o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not necessary to resort to the rule of purposive interpretation. However, it is found that the aforesaid interpretation is also in conformity with the legislative scheme of the CGST Act and the Rules. An order under Rule 86A (1) of the Rules does not require a prior show cause notice to be issued to a taxpayer as it is by its very nature an emergent provision to immediately block the usage of the ITC credited in the ECL, which the Commissioner or an officer authorized by him has reasons to believe has been fraudulently availed or is ineligible. The concerned authorities are required to proceed to determine whether a taxpayer has wrongly availed or utilized the ITC, under Sections 73 or 74 of the CGST Act and if it is found that the taxpayer has wrongly availed of the ITC the proper officer is required to pass an order to determine the amount of tax, interest or penalty payable. The demand as raised are required to be determined under Sections 73 and 74 of the CGST Act. Rule 86A (1) of the Rules does not contemplate an order, the effect of which is to require a taxpayer to replenish his ECL with valid availment of ITC, to the extent of ITC used in the past, which the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent that the said orders purport to block the input tax credit (hereafter also referred to as ITC) in their respective Electronic Credit Ledgers (hereafter also referred to as ECLs) in excess of the credit available in their respective ECLs. The same creates an artificial negative balance in the ECL. Resultantly, till the negative balance in the ECL of the respective petitioners is not extinguished by further addition (credit) of ITC in the ECL, the petitioners are disabled to utilize the ITC availed by them for payment of their dues. Thus, in effect, only the ITC remaining after adjusting the negative balance, would be available to the taxpayer for discharging its dues. 2. It is the case of the petitioners that Rule 86A of the Rules does not permit blocking of the ITC, which is unavailable in a taxpayer s ECL. They claim that on a plain reading of Rule 86A of the Rules, the power of the competent officer to block the ITC of a taxpayer is confined to the ITC that is available at the material time in the taxpayer s ECL. The Revenue counters the said contention. According to the Revenue, the Commissioner / authorized officer has the power to not allow the debit of an amount eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. and Ors. v. Union of India Neutral Citation No. 2020:DHC:1868-DB and the decision of the Division Bench of the Bombay High Court in Dee Vee Projects Ltd. v. Government of Maharashtra W.P (C) 2693/2021 decided on 11.02.2022 in support of the contention that the credit balance as available in the ECL on account of the input tax availed by a taxpayer, is his property and thus, in terms of Article 300A of the Constitution of India, a taxpayer cannot be deprived of the same except by authority of law. 8. The learned counsel appearing for the Revenue countered the aforesaid submissions. Mr Harpreet Singh, learned counsel appearing for the Revenue in W.P.(C) 10980/2024 contended that the view of the Gujarat High Court in Samay Alloys India Pvt. Ltd. v. State of Gujarat Neutral Citation No. 2022:GUJHC:6969-DB, is erroneous. He relied upon the decisions of the Calcutta High Court in Basanta Kumar Shaw v. Assistant Commissioner of Revenue, Commercial Taxes and State Tax, Tamluk Charge Ors. 2022 SCC OnLine Cal 4544 where the Court had taken a contrary view. He submitted that the Calcutta High Court had interpreted the provisions of Rule 86A of the Rules by applying the rule of purposive co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He submitted that it is also apparent that Rule 86A of the Rules comes into play after the act of availing fraudulent or ineligible credit has already taken place. Thus, the ITC available at the given point of time in the ECL may be wholly tainted, partially tainted or wholly untainted. However, the same would be immaterial, as in terms of Rule 86A of the Rules, the Revenue may freeze the taxpayer s ECL to an amount equivalent to the fraudulent or ineligible credit. 13. Mr. Ohja, learned counsel also advanced submissions on behalf of the Revenue. He submitted that Rule 86A of the Rules is akin to a no debit provision. It does not allow debit of the ECL to the extent of fraudulently availed or ineligible credit. He also submitted that Rule 86A of the Rules cannot be construed as a provision for recovery of tax. It is merely a temporary measure of not permitting the taxpayer to use the ITC for discharge of its dues or to seek a refund of the same. He stated that this is the least invasive method adopted to protect the revenue. He submitted that the expression available as occurring in the opening part of Rule 86A of the Rules would include the ITC, which had been passed on or was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the U.K. Supreme Court in Commissioner of His Majesty s Revenue and Customs v. NHS Lothain Health Board 2022 UKSC 28. 19. Next, he submitted that a construction, which enables a person to profit from his own wrongful act, ought to be avoided. Thus, Rule 86A of the Rules ought to be interpreted in order to enable protection of the Revenue s interest to the full extent. 20. He also countered the submission that the Revenue s interpretation of Rule 86A of the Rules would in effect extend the duration of the said order. He submitted that if the power under Rule 86A of the Rules was confined to block only the credit balance of the input tax in the ECL, the concerned officer would require to pass multiple orders to freeze the credit as and when it becomes available. Each of such orders would be operative for a period of one year. Thus, cumulatively the full duration of a debit freeze would exceed one year. He submitted that this would also require the Revenue to keep a round the clock watchful eye on the amounts being credited to the taxpayer s ECL, which would make the task of the Revenue more onerous. NATURE OF INPUT TAX CREDIT 21. The debate in the present petitions regarding the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as may be prescribed; (aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37. (b) he has received the goods or services or both. Explanation .- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.; (ba) the details of input tax credit in respect of the said supply communicated to such registered person under Section 38 has not been restricted; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both, as is attributable to a registered taxpayer s business. In terms of Section 17 (2) of the CGST Act, the ITC is permissible for effecting taxable supplies including zero rated supplies. It is not available in respect of exempted supplies. Thus, the credit of ITC is restricted to input tax, that is attributable to taxable supplies including zero rated supplies. Sub-section (3) of Section 17 of the CGST Act provides value of exempted supplies under Sub-section (2) of Section 17 of the CGST Act and would include tax liable to be paid by the recipient of the supplies. The value of exempt supplies is such as may be prescribed and would include supplies on which tax is payable by the recipient on a reverse charge method. Sub-section (4) of Section 17 of the CGST Act provides the manner for a bank, company or a financial institution to avail ITC. Sub-section (5) of Section 17 of the CGST Act refers to certain supplies on which ITC is not available to a taxpayer. Sub-section (6) of Section 17 of the CGST Act enables the government to prescribe the manner in which the credit referred to in Sub-section (1) and (2) of Section 17 of the CGST Act may be attributed. 26. Section 18 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue had founded their submissions on the above observations made by the Supreme Court. The said observations have to be read in the context in which the said observations were made. In the said case, the Supreme Court was considering a challenge to the constitutional validity of the provisions of Section 19 (11) of the Tamil Nadu Value Added Tax Act, 2006, which curtailed the right of the registered dealer to claim ITC. Section 19 (11) of the said Act provided that if a registered dealer had failed to claim ITC in respect of a transaction of a taxable purchase in any month, he shall make the claim before the end of the financial year or before ninety days from the date of purchase, whichever is earlier. It was the appellant s case in the aforementioned matter that it had received taxable invoices late from the registered dealer and therefore its claim was delayed. The appellant contended that the credit for input tax was its vested right, which could not be curtailed or fettered by any unreasonable restrictions imposed under Section 19 (11) of the Tamil Nadu Value Added Tax Act, 2006. According to the appellant, the said restriction requiring that the claim be made within ninet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ODVAT credit lying in its balance as on the stipulated date (16.03.1995) represented a vested right accrued to the taxpayer under the existing law and the Central Government had no powers to make a rule for taking away such vested rights. The Supreme Court, in effect, accepted the said contention as is apparent from paragraphs 5 and 6 of the said decision, which are reproduced below: 5. Rule 57-F(4-A) was introduced into the Rules pursuant to the Budget for 1995-96 providing for lapsing of credit lying unutilised on 16-3-1995 with a manufacturer of tractors falling under Heading No. 87.01 or motor vehicles falling under Headings Nos. 87.02 and 87.04 or chassis of such tractors or such motor vehicles under Heading No. 87.06. However, credit taken on inputs which were lying in the factory on 16-3-1995 either as parts or contained in finished products lying in stock on 16-3-1995 was allowed. Prior to the 1995-96 Budget, the Central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The condition required for the same was that the credit of duty paid on inputs could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Scheme is merely being altered and, therefore, does not have any retrospective or retroactive effect, submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 19. It is, therefore, that in the case of Eicher Motors Ltd. v. Union of India (1999) 2 SCC 361 this Court said that a credit under the MODVAT Scheme was as good as tax paid . [emphasis added] 36. In a scheme for taxation, which provides for credit for taxes on inputs, the taxpayer would be entitled to such credit subject to complying with all the necessary conditions for validly availing the same. If the conditions for validly availing the same are satisfied, it would vest a right with the taxpayer to utilize the same in accordance with the relevant statute. Undeniably, the said right is a valuable right and a taxpayer cannot be deprived of the same except by a validly enacted statute or rules. It is settled law that legislature has wide latitude in laws relating to economic activities. The legislature is required to be allowed sufficient play in the joints as it has to deal with complex problems [R.K. Garg v. Union of India: (1981) 4 SCC 675] . Although, the legislature has a wide discretion and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and expressly empowers the Commissioner or any other officer authorized by him, not below the rank of Assistant Commissioner, to not allow debit of an amount from the ECL subject to the conditions specified therein being satisfied. 39. As noted above, ITC can be availed by a taxpayer only if the necessary conditions for availing the same are complied with and the same is subject to the conditions and restrictions under the CGST Act and the Rules made thereunder. But it cannot be disputed that it is a valuable right. 40. Undisputedly, the exercise of power under Rule 86A of the Rules effectively denies a taxpayer its ability to discharge its dues by utilizing the ITC or seeking a refund which it is entitled to do under the CGST Act and the Rules. The ITC, undoubtedly, is a valuable resource available to a taxpayer for payment of taxes and other dues. Thus, the denial of access of this resource in fact denies a taxpayer, albeit temporarily, access to its assets. An order under Rule 86A of the Rules in effect reduces the working capital available to a taxpayer. Thus, notwithstanding that the entitlement to ITC may not be an indefeasible right and can be curtailed by the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to above. 44. However, insofar as the interpretation of Rule 86A of the Rules is concerned, the said principle may not be an apposite one. Rule 86A of the Rules does not impose a condition, which the taxpayer has to satisfy for availing the ITC as the same stands credited in the assessee s ECL. At the stage of issuing an order under Rule 86A of the Rules, there is no determination that the ITC availed by the assessee is fraudulent or ineligible. An order under Rule 86A of the Rules is premised on the Commissioner or the officer authorized by him, having reason to believe that the available ITC has either been availed fraudulently or is ineligible on account of the circumstances as set out in Clauses (a) and (d) of Sub-rule (1) of Rule 86A of the Rules. An order under Rule 86A of the Rules is not in the nature of a condition to be complied by the taxpayer or a burden to be discharged by it. It is an order passed in exercise of drastic powers that are granted to the concerned authority. Such a power can be exercised only if the conditions set out in Sub-rule (1) of Rule 86A of the Rules are satisfied and the extent of such power is circumscribed by Rule 86A of the Rules. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en with its impact. As observed by Rowlatt, J. in Cape Brandy Syndicate v. Commissioners of Inland Revenue [(1921) 1 KB 64] that in a taxing act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 49. The Court may apply the rule of purposive interpretation in case a statutory provision is capable of more than one interpretation. In cases of ambiguity, it would be expedient to adopt a construction, which would further the purpose and objective of the statute. It is relevant to refer the following observations of the Supreme Court in District Mining Officer Ors. v. Tata Iron and Steel Co. Another (2001) 7 SCC 358: .A statute is an edict of the legislature and in construing a statute, it is necessary, to seek the intention of its maker. A statute has to be construed according to the intent of them that make it and the duty of the court is to act upon the true intention of the legislature. If a statutory provision is open to more than one interpretation the court has to choose that interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage, it is relevant to refer to the following passage from Craies on Legislation [Craies on Legislation, A Practitioners Guide to the Nature, Process, Effect and Interpretation of Legislation, Daniel Greenburg, South Asian Edition, 2010.] which sets out the aforesaid Rule: Effect of rule (1): unintended consequences of clear language The principal effect of the cardinal rule, subject to the restrictions and modifications explored below, is that a court is bound to give effect to clear legislative language even if the consequences in the instant case are such that the legislature did not contemplate and would not have countenanced. As Jervis C.J. said in Abley v Dale If the precise words used are plain and unambiguous, we are bound to construe them in their ordinary sense, even though it does lead to an absurdity or manifest injustice. Words may be modified or varied where their import is doubtful or obscure, but we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning. So, for example, the following dictum of Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the legislature as ascertained from the language used and I do not think it permissible to arrive at a construction other than what the clear statutory words dictate either by leaning in favour of the landlord or by mixing interests when it is plain that the interest relied on had to be continuous singe before the conversion. It was not open to the judge to write into s. 10 (4) the words at any time (particularly when the words are found in s. 10 (1)), nor to rewrite s. 10 (1) (b) in the way he suggests is its meaning when read with s. 10 (1) (a). To revert to the intention of Parliament, it can only be assumed from the statutory language that Parliament intended a simple test: at the relevant date either own the freehold from before the conversion or be a beneficiary under the same trust since before the conversion. It would surely have been obvious to Parliament that so unsophisticated a test would give rise to consequences such as those identified by the judge. Nevertheless, that is the test which was enacted and the courts must give effect to it. 52. It is also relevant to refer to the text of Maxwell [Maxwell on the Interpretation of Statutes, P. St. J. Langan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36- i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or ii. without receipt of goods or services or both; or b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reasons to be recorded in writing, not allow 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. (2) The Commissioner, or the officer authorised by him u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner (or an officer authorized by him) may have reasons to believe that in the past a taxpayer had availed and utilized ITC by debiting its ECL is not the condition precedent for passing an order under Rule 86A (1) of the Rules. 58. Much emphasis was laid by the learned counsel appearing for the Revenue that Rule 86A (1) of the Rules contemplates an order which prohibits a debit of an amount equivalent to such credit in the electronic credit ledger for discharge of any liability under the CGST Act, which the concerned officer has reasons to believe has been fraudulently availed or is ineligible. According to the Revenue, the expression amount equivalent to cannot be read in conjunction with the words credit of input tax available in the electronic credit ledger . However, we are not persuaded to accept this contention. This is because this interpretation disregards the opening sentence of Rule 86A (1) of the Rules, which sets out the conditions to be satisfied for passing an order under the said provision. 59. Plainly, the expression amount equivalent to such credit refers to the credit of input tax available in the taxpayer s ECL, which the Commissioner or the officer authorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urselves to the interpretation given in Samay Alloys rather we are persuaded by the interpretation of the rule given in R.M. Dairy Products LLP. The word available occurring in rule 86 (1) cannot be read in isolation and it has to be read along with the remaining words which is in the electronic credit ledger has been fraudulently availed or is ineligible , has been fraudulently availed would undoubtedly denote a situation which has occurred in the past. This becomes clear if we peruse the allegations contained in the show cause notice. It has been stated therein that as per the data base record, there is a mismatch between the input-tax credit from GSTR-2A and GSTR-3B for the periods mentioned above which in the prima facie view of the first respondent is inadmissible as per the provisions of the WBGST/CGST Act, 2017. In this regard, the first respondent has referred to section 42 (1) (a) of the WBGST/CGST Act, 2017. *** *** *** 19. Bearing in mind the above decisions, if we examine Rule 86A (1) of the Rules, we find the key words are available in and has been . Oxford Dictionary defines available as able to be used or obtained ; at someone's disposal . The word available is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount is then required to be credited in the taxpayer s ECL. Sub-section (2) of Section 41 of the CGST Act provides that if ITC has been availed by a registered person in respect of supplies of goods or services or both and the tax payable on such supplies has not been paid by the supplier then such input tax is required to be reversed along with applicable interest. 66. There is no cavil that ITC is availed by a registered person when he files a return and the same is credited in his ECL. The credit of input tax as available in the ECL is then available to the taxpayer for discharging his dues under the CGST Act or in given cases, for seeking its refund. 67. Section 49 (4) of the CGST Act expressly provides that the amount available in the ECL may be used for making payments towards tax, interest, penalty or other amount. The opening sentence also indicates that the expression amount available in the electronic credit ledger is the amount that stands to a taxpayer s credit in the ECL. It is that amount that can be used or utilized by the taxpayer for payment of his dues. Sections 49A and 49B of the CGST Act provide for the manner of utilizing ITC. Section 49 (4), Section 49A a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an officer authorized by him has reason to believe has been fraudulently availed or is ineligible for the reasons specified in Clauses (a) to (d) of Rule 86A (1) of the Rules. In a case where the Commissioner or an officer authorized by him has a reason to believe that the tainted ITC is less than the ITC credited in the ECL, then it would necessarily follow that the order under Rule 86A (1) of the Rules would be confined to such amount as equivalent to the ITC, which the Commissioner or an officer authorized by him has reasons to believe has been fraudulently availed or is ineligible. 71. The amount credited in a taxpayer s ECL may be partly tainted. Illustratively, a taxpayer may have availed ITC on the strength of certain invoices in respect of any supply against which the entire tax has not been paid. In such a case, it is not necessary for the Commissioner or an officer authorized by him to ascertain which portion of the ITC is tainted as the entire ITC once credited in the ECL is in a fungible pool. Thus, the concerned officer can, in exercise of powers under Rule 86A of the Rules, freeze the ECL to the extent of inadmissible ITC by disallowing debit of an amount equivalent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Division Bench of the Gujarat High Court had examined the provisions of Rule 86A of the CGST Rules and held as under: 28. Rule 86A of the CGST Rules empowers the Commissioner or his subordinates to freeze the debit in the electronic credit ledger provided he has reasons to believe that the credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible. Thus, the condition precedent is that the input tax credit should be available in the electronic credit ledger before the power under Rule 86-A is invoked by the authority. In the case on hand, it is not in dispute that the amount of input tax credit available in the electronic credit ledger as on the date of blocking of ledger was Nil. If no input tax credit was available in the ledger, the blocking of electronic credit ledger under Rule 86-A of the Rules and insertion of negative balance in the ledger would be wholly without jurisdiction and illegal. 29. On a plain reading of the opening part of Rule 86A (1) of CGST Rules, 2017, it transpires that the power conferred under Rule 86A can be exercised by the Commissioner or an officer authorised by him (not below the rank of an Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plain language and underlined intent Rule 86A. 75. The Division Bench of Telangana High Court has concurred with the said view in Laxmi Fine Chem v. Assistant Commissioner2 and held as under: 7. Taking into consideration the decision of the Division bench of Gujarat High Court which has also been relied upon by this High Court and by this very Bench in yet another writ petition i.e., W.P. No. 31039 of 2023, decided on 20.11.2023, we find that the action on the part of the respondents in passing an order of negative credit to be contrary to Rule 86 (A). In the event, if no input tax credit was available in the credit ledger, the rules does not provide for insertion of negative balance in the ledger and therefore what was permissible was only to the block the electronic credit ledger and under no circumstances could there had been an order for insertion of negative balance in the ledger. If there is a credit balance available, then the authorities concerned in terms of provisions of Rule 86 (A) may for reasons to be recorded in writing not allowed the credit of the said amount available equivalent to such credit. However, there is no power conferred upon the authorities for block o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed under Rule 86A (1) of the Rules is operative only for a maximum period of one year from the date of passing the said order. 80. Rule 86A of the Rules is not a machinery provision for recovery of tax or dues under the CGST Act. It is not a part of the scheme of the machinery provisions for assessment and determination of the tax and dues as payable under the CGST Act. It is an emergent measure for protection of revenue by temporarily not allowing debit of available ITC in the ECL, which the Commissioner or an officer authorized by him has reasons to believe has been wrongfully availed. 81. As noted above, the revenue authorities are required to proceed under Sections 73 and 74 of the CGST Act for determination of the amount due. After the proceedings under Chapters XII, XIV and XV of the CGST Act have commenced and the Commissioner is of the opinion that for the purpose of protection of government revenue, it is necessary to do so, he may pass an order under Section 83 (1) of the CGST Act, provisionally attaching any property including the bank account of a taxpayer. This is also one of the measures that may be resorted to pending conclusion of the proceedings. 82. R ..... 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