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TMI Blog2024 (10) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit, it was observed that if there is Nil or insufficient balance in a particular tax head in the Electronic Credit Ledger, then the balance in another tax head can be blocked only if the cross-utilization from such head is permissible in law. But such cross-utilization between CGST and SGST is not permissible and therefore, the SGST credit ledger cannot be blocked if sufficient credit balance is not available under the CGST head and vice versa. The issues raised in this petition are already answered in favour of the petitioner as there cannot be any blocking of the credit in Electronic Credit Ledger if there is no sufficient balance available. The respondents are directed to withdraw the negative block of the Electronic Credit Ledger at the earliest to the extent of Rs. 2,44,05,567/- and whatever balance remained in the Electronic Credit Ledger after the removal of the balance of the negative figure, the same shall not be utilised by the petitioner till the show cause notice is issued, if any, under sections 73 or 74 respectively of the GST Act. Petition allowed. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE NIRAL R. MEHTA Appearance: For the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner received an email dated 08.12.2023 from the respondent stating that Input Tax Credit amounting to Rs. 2,44,05,567/- has been blocked by the Assistant Commissioner, Una, on 08.12.2023. The petitioner was also informed to view the credit ledger on the portal for details. 7. On verification of the portal, the petitioner could not find any order/notice explaining the reason for such blocking. The Electronic Credit Ledger of the petitioner on the GST portal only indicated that amount of blocked credit under the head of integrated tax was Rs. 2,44,05,567/- and stated that block credit was due to Credit claimed without receipt of goods/services . There was no context or reasons provided for blocking the credit in the Electronic Credit Ledger. There was no balance of input tax credit (ITC) in Electronic Credit Ledger of the petitioner and therefore, in absence of any balance in Credit Ledger, Electronic Credit Ledger was reflecting negative balance of Rs. 2,44,05,567/-. 8. The petitioner, therefore, on inquiry with the GST office, Una on 20.12.2023 was informed that such blocking of the credit was at the behest of officers of Surat Zonal Division of the Director General of GST Intelli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Electronic Credit Ledger. 12. The petitioner however was not provided any reason for such blocking. Thereafter the impugned action by email dated 8.12.2023 was taken for blocking of ITC of Rs. 2,44,05,567/- without there being any balance in Electronic Credit Ledger resulting into negative blocking. 13. The petitioner thereafter had written a letter dated 01.01.2024 to the Principal Additional Director General, DGGI, Headquarter at New Delhi with regard to blocking of ITC in Electronic Credit Ledger with a request to unblock the same followed by letter dated 04.01.2024 to the Commissioner of CGST, Shimla, Himachal Pradesh requesting for unblocking the credit. 14. The petitioner thereafter by letter dated 06.01.2024 again requested the Assistant Commissioner, CGST, Una, Himachal Pradesh for unblocking the credit. 15. The petitioner received a reply to its letter from SIO Group-04, DCGI, SZU, Surat by email 05.02.2024 with a request to the petitioner to provide the details of the officer who has blocked the ITC. The petitioner thereafter by email of the same date again informed respondent no. 4 that there was no mention of a specific officer s name in the mail dated 08.12.2023 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in (2022) 91 GST 338 (Gujarat) wherein it is held that on a plain reading of Rule 86A (1) of the CGST Rules, power conferred under such rule can be exercised by the respondent authorities if credit balance of ITC is available in the Electronic Credit Ledger and the Commissioner or officer authorised by him is having reason to believe that such credit has been fraudulently availed or is ineligible and such reasons to believe are recorded in writing. 22. It was therefore, submitted that none of the conditions to invoke Rule 86A of the CGST Rules is fulfilled in the facts of the present case and as such, there is no authority for negatively blocking of the credit to be availed in future by debiting the Electronic Credit Ledger of the petitioner and the respondent therefore, has no jurisdiction to negatively block the ITC of Rs. 2,44,05,567/-. It was therefore, submitted that impugned action on part of the respondent is required to be quashed and set aside. 23. It was further submitted that blocking of ITC has been done merely on suspicion of wrongdoing without issuing any show cause notice or providing any opportunity of hearing and without any order passed under sections 73 and 74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the rule of judicial discipline and propriety and the doctrine of precedents has a merit of promoting certainty and consistency in judicial decisions providing assurance to individuals as to the consequences of their actions. It was submitted that Division Bench of this Court way back in 2022 has held that no negative blocking can be made by invoking Rule 86A of the GST Rules, the same would be binding to the respondent authorities and the respondent authorities could not have passed the impugned order dated 8.12.2023 for negative blocking. 30. Learned advocate Mr. Lodha also referred to the minutes of the 38th GST Council Meeting held on 18th December, 2019 wherein in relation to agenda item No.6(ii), with regard to insertion of Rule 86A so as to block the ineligible ITC to control the menace of fake invoices but at the same time it was pointed out that by notification dated 26.12.2019 when Rule 86A was inserted it contained safeguard that said rule can be invoked after the reasons to be recorded in writing with regard to the satisfaction that credit of ITC has been availed fraudulently or on the basis of invoices issued by the registered person who has been found non ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions, reliance was placed on the following decisions: 1) Decision of Calcutta High Court in case of Basanta Kumar Shaw v. The Assistant Commissioner of Revenue Commercial Taxes Ors reported in 2022 SCC OnLine Cal 4544. 2) Decision of Hon ble Supreme Court in case of Basanta Kumar Shaw v. The Assistant Commissioner of Revenue Commercial Taxes Ors (rendered on in Petition(s) for Special Leave to Appeal (C) No.20268-20269/2022 dated 07.08.2023) 3) Decision in case of M/s. R M Dairy Products LLP v. State of Uttar Pradesh Ors reported in 2021;AHC;73172-DB. 36. Learned advocate Mr. Dave also placed on record the reasons for blocking the ITC forwarded to the petitioner on 21.03.2024. However, learned advocate Mr. Lodha submitted that the petitioner has not received any communication or reasons recorded for blocking ITC as stated by the learned advocate Mr. Dave. 37. Having heard the learned advocates for the respective parties and considering the scheme of the GST Act and the CGST Rules framed thereunder, Rule86A was inserted by Notification No. 75/2019-Central Tax dated 26.12.2019 whereby condition of use of amount available in Electronic Credit Ledger is prescribed. Rule 86A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 49 of the GST Act stipulates for payment of tax, interest, penalty and other amounts. Sub-section (2) of section 49 refers to the input tax credit as self-assessed in the return of a registered person by crediting the Electronic Credit Ledger in accordance with section 41 of the Act. Section 41 of the GST Act provides for availment of input tax credit. 40. This Court had an occasion to consider the issue arising in this petition in case of Samay Alloys India Pvt. Ltd. v. State of Gujarat (supra) wherein while considering the applicability of Rule 86A of the Rules, the Court has observed 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e electronic credit ledger of the registered person. The rule merely allows the proper officer to disallow the registered person debit from the electronic credit ledger for the limited period of time and on a provisional basis. In case debit entries are made by the proper officer, the same will tantamount to permanent recovery of the input tax credit and certainly permanent recovery is governed by the statutory provisions (Section 73 of 74 of CGST Act) and it certainly travels beyond the plain language and underlined intent Rule 86A. 36. Reference may be made to a judgement of the Patna High Court in the case of Rohtas Industries Limited Vs. Superintendent of Central Excise (2000) 123 ELT 124, wherein the High Court in context of central excise law held that the proper officer cannot make debit entries in the personal ledger account maintained by the assessee. A personal ledger account is like a bank account maintained by the assessee with the excise department. Similarly, the electronic credit ledger is a credit account maintained by the registered person with the department and revenue cannot be authorised to make debit entries in such account without express provision of law. xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may also arise that a registered person may persistently and continuously avail and utilise the fraudulent credit and in such scenario the strict interpretation of Rule 86A will defeat the underlying purpose of enacting such a preventive provision. In this regard. Rule 86A is not the only measure available with the Government. The Government can certainly initiate proceedings under the provisions of section 73 or section 74, as the case may be, for recovery of credit wrongly claimed. Further, the Government in an appropriate case may initiate proceeding for Cancellation of registration (either of the supplier of the recipient or both) under Section 29 of CGST Act. Furthermore, the Government can also provisionally attach any property, including bank account, belonging to the taxable person under Section 83 of CGST Act 43. Accordingly, the fact or possibility of registered person availing and utilising the fraudulent credit persistently and continuously cannot be the basis to invoke Rule 86A. 44. The power to restrict debit from the electronic credit ledger is extremely harsh in nature. The rule outreaches the detailed procedure provided in the legislature for determination of inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. (II) The power conferred upon the authority under Rule 86A of the Rules for blocking the ITC could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on subjective weighty grounds and reasons. (III) The power under Rule 86A of the Rules should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (IV) The aspect of availing the credit and utilization of credit are two different stages. The utilization of credit is a vested right. No vested right accrues before taking credit. (V) The Government needs to apply its mind for the purpose of laying down some guidelines or procedure for the purpose of invoking Rule 86A of the Rules. In the absence of the same, Rule 86A could be misused and may have an irreversible and detrimental effect on the business of the person concerned. In this regard, the Government needs to act promptly. 44. Thus, the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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