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TMI Blog2024 (12) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... e or presume that in the present case, the cross empowerment will come into picture against the State Authorities - the State Authorities cannot proceed based on the Form GST ASMT-10, however, in the absence of any further orders, subsequent to the issuance of ASMT-10 by the State Authorities, it is pre-mature to decide as to whether the State Authorities are barred by cross empowerment or not. Even if the State Authorities are barred by cross empowerment for initiation of proceedings against the petitioner, the blocking of ITC will always be the domain of State Authorities, which was also accepted by the Central Authorities, since the petitioners are registered person of the State Authorities - this Court is of the considered view that in this case, the State Authorities have acted well within their power/jurisdiction and it is pre-mature to come to the conclusion as to whether the cross empowerment will come into picture or not. Whether the blocking of ITC by virtue of the intimation dated 24.06.2024, 09.09.2024 and 10.09.2024 is in accordance with the provisions of Rule 86A of the GST Rules, 2017? - HELD THAT:- A reading of the Rule 86A would show that if the Commissioner or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the State Authorities has to consider the same and decide with regard to the continuation of proceedings initiated by them - this Court finds no force in the submissions made by the learned Senior counsel appearing for the petitioner on all the three issues and accordingly, the same is rejected. Therefore, this Court is of the considered view that this writ petition is liable to be dismissed. Petition dismissed. - Hon'ble Mr. Justice Krishnan Ramasamy For the Petitioner : Mr. Satish Parasaran, Senior counsel, for Mr. Karthik Sundaram For the Respondents : Mr. C. Harsha Raj, Additional Government Pleader, for R1 R2, Mr. R.P. Pragadish, Senior Standing counsel, for R3 R4 ORDER This writ petition has been filed challenging the impugned notice in the Form ASMT-10 dated 26.09.2024 issued by the 1st respondent and consequently, to direct the respondents 1 and 2 to unblock the electronic credit ledger/electronic cash ledger (hereinafter called as ECL ) of the petitioner. 2. Mr.Satish Parasaran, learned Senior counsel appearing on behalf of the petitioner had made the following submissions: 2.1 In this case, the main grievance of the petitioners is that the petitioner's ECL has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissible under the provisions of Rule 86A of the GST Rules. 2.6 Further, he would submit that the Officer, who has blocked the ECL of the petitioner, should record the reasons as to believe that the credit has been fraudulently availed by the petitioner and the same is ineligible. In this case, when the ECL was initially blocked for a sum of Rs. 72,902/-, a DRC-01A was issued and the amount admitted in the said DRC-01A was paid, whereby the dispute raised by the respondent had attained its finality. However, without considering the proceedings initiated by the Central Authorities, the State Authorities had also initiated a similar proceedings and issued the impugned Form ASMT-10. 2.7 Further, he would submit that now, the Central Authorities have issued DRC-01A on 08.10.2024 with regard to the wrongful availment of a sum of Rs. 13.10 Crores. Therefore, he would submit that the impugned Form DRC ASMT-10 issued by the State Authorities shall be quashed. In support of the law regarding the negative blocking, the learned counsel referred to the judgement of the Hon'ble Division Bench of Gujarat High Court in Samay Alloys India Pvt. Ltd., vs. State of Gujarat reported in 2022 (61 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate proceedings for the quantum of amount, which was wrongfully availed by the petitioner since the period and quantum of amount raised by the State Authorities is entirely different. Further, there is no bar in any of the Statute or in any of the ruling of this Court and the Hon'ble Apex Court in this regard. Therefore, he would contend that the State Authorities are well within their jurisdiction/power. 3.3 However, he fairly submitted that subsequent to the issuance of ASMP 10, the Central Authorities have issued DRC-01A to the extent of Rs. 13.10 Crores on 08.10.2024. Therefore, he would submit that if any further orders are issued on the same issue by the State Authorities, after the issuance of Form GST DRC-01A by the Central Authorities, the petitioner can very well challenge the same before this Court in the manner known to law. Therefore, he would contend that now the petitioners had filed the present petition in a pre-mature manner by challenging the ASMT-10 issued by the respondents. 3.4 Further, he would submit that only the State Authorities will have power to pass blocking orders, based on the wrongful availment of credit to the extent of a sum of Rs. 13.10 Crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies are empowered to issue Form GST ASMT-10 dated 26.09.2024, subsequent to the search conducted by the Central Authorities on 13.03.2024?: 6.1 As far as the 1st issue is concerned, in this case, initially, the Central Authorities have conducted search at petitioner's place of business on 13.03.2024. Thereafter, on 14.03.2024, the Statement of one of the Directors, Arun Balaji has been recorded. According to the Central Authorities, up to 31.03.2024, the petitioners have wrongfully availed the ITC to the extent of Rs. 6.33 Crore. 6.2 On 15.03.2024, the said Arun Balaji was arrested and bank account of the tax payer was freezed on 18.03.2024 under Section 83 of GST Act, 2017. Subsequently, on 23.05.2024, the tax payer has paid a sum of Rs. 1.3 Crore to the respondents. Thereafter, the State Authorities have issued Form GST ASMT-10 on 26.09.2024 for wrongful availment of ITC for a sum of Rs. 13.10 Crores. 6.3 The search conducted by the Central Authorities was pertaining to Rs. 6.33 Crores, whereas the jurisdiction of the State Authorities is about Rs. 13.10 Crores. Though the issue raised by the Central Authorities and State Authorities is similar, the quantum of amount demanded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECL of the petitioners, i.e., at the time of blocking, the position of ITC was Nil in ECL. Therefore, it was contended by the petitioner that the said blocking is contrary to the provisions of Rule 86A as well as the law laid down by the Hon'ble Division Bench of Gujarat High Court and Hon'ble Delhi High Court in the aforementioned case laws. 7.2 Now, let me analyse the situation, under which, the State Authorities had issued the intimation with regard to blocking of ITC. At this juncture, it would be apposite to extract the Rule 86A, which reads as follows: 86A. Conditions of use of amount available in electronic credit ledger.- (1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as a) 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- 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 86A 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 86A of the Rules and insertion of negative balance in the ledger would be wholly without jurisdiction and illegal. 29 to 32. ...... 33. One of the primary conditions in order to invoke Rule 86A is that the credit of input tax should be available in the electronic credit ledger. Further, such credit should be claimed to have been (supported by reason to believe recorded in writing) fraudulently availed. 34. Accordingly, in case where (i) Credit of input tax is not available in the electronic credit ledger or (ii) such credit has already been utilised, the powers conferred under Rule 86A cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contains that The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible . This part of Rule 86A(1) alone was interpreted by both the Courts while giving their findings. The literal interpretation of this 1st part of the provisions of Rule 86A(1) would shows that if the Commissioner or the Assistant Commissioner having reason to believe that the ITC available in ECL has been fraudulently availed or ineligible, the said ECL can be blocked under the circumstances mentioned in Rule 86A(1)(a) to (d) of GST Rules. 7.10 The 2nd part of the Rule 86A of GST Rules, 2017, states as may, for the reasons to be recorded in writing, not allow debit of an amount equivalent to such credit available in electronic credit ledger for discharge of liabilities under Section 49 , which means the Officers have to record the reasons in writing not to allow the debit of amount equivalent to such credit for discharge of liabilities under Section 49. The word amount equivalent to such credit for discharge of liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the fraudulent availment/utilisation in most of the cases and certainly, the fraudulently availed ITC would not be available in the ECL at the time of blocking. Therefore, the right way of interpretation of Rule 86A of GST Rules, 2017, is as to whether the fraudulently availed credit was made available for the payment of output tax liabilities at any point of time subsequent to the said fraudulent availment. Thus, the Rule 86A would apply to pass blocking orders by the State Authorities to the extent of fraudulently availed credit in ECL, whether it is available at the time of passing the blocking orders or not. If any amount is credited to the ECL subsequently, to the extent of amount mentioned in the blocking orders, the ECL cannot be debited. 7.16 Thus, it is clear that after the fraudulent availment of ITC, if the same was available in ECL, for debit, at any point of time, the Department is entitled not to allow the debit of amount equivalent to such credit in ECL whether it is utilised or not and in the event, if the ITC was utilised upto the accumulation of credit to the extent of fraudulently availed/utilised credit. 7.17 In a Statute, if the literal interpretation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of zero balance of ITC in the ECL. Since the negative blocking can continue up to the stage of accumulation of ITC to the extent of wrongful availment of credit in the ECL, the blocking orders can be issued even at the time of zero balance of ITC in the ECL. 7.21 Therefore, the Hon'ble Division Bench of Gurajat High Court and the Hon'ble Delhi High Court had no occasion to discuss with regard to the later part of the provisions of Rule 86A in the aforesaid case laws, as discussed above. Thus, in the absence of non-consideration of later part of provisions of Rule 86A, and in view of the above discussions, this Court is unable to follow the same. 7.22 For the above reasons, this Court is of the considered view that the negative blocking is well within the scope of provisions of Rule 86A of GST Rules. The blocking of ITC can be made to the extent of wrongful availment of credit, for which Rule 86A empowers State Authority not to allow debit of the amount equivalent to such wrongful availment of credit to the extent of available ECL at any point of time. Therefore, at the time of blocking, the availability of ITC in the ECL is immaterial. The blocking orders would cover both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chment orders will get vacated upon payment of 10% of the disputed amount. However, in this case, the said aspect would come into picture only after the passing of assessment order and the same cannot be applied at the stage of investigation/initiation of proceedings before the passing of assessment order. If any intelligence is given for the said submission, the provisions of Rule 86A will become redundant and the Official will be empowered to block only 10% of the fraudulently availed credit, which was not the intention and wisdom of the Rule maker. Therefore, the said submission is hereby rejected. 11. In fine, to put it in a nutshell, this Court holds as follows: i) As per the provisions of Rule 86A of GST Rules, 2017, the appropriate reasons were assigned by the Authorities in all the blocking orders dated 24.06.2024, 09.09.2024 and 10.09.2024. ii) The word credit of ITC available in ECL referred in Rule 86A(1) of GST Rules, 2017, would mean that after the fraudulent availment of ITC, the same should have been made available in ECL, at any point of time, for debiting the ECL to discharge the output tax liabilities. Thus, the word available cannot be interpreted as the ITC shou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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