The Gujarat High Court while directing the GST Department to refund Rs.20 Lakh to assessee held that no power of negative block for credit to be availed in future.
When the writ applicants, Samay Alloys attempted to file their return for the month of September, 2021, there was no credit balance in the electronic credit ledger. Despite the same, the portal displayed a message that the electronic credit ledger had been blocked by the respondent. It was further noticed by the writ applicants that a negative balance had been entered in their electronic ledger by the respondent No.2. In such circumstances and as a result of such negative balance, if the writ applicants would file return for the month of September, 2021 by claiming input tax credit, the writ applicants would be required to pay an additional amount of output tax under the provisions of the GST Act to the extent of negative balance of the input tax credit in the electronic credit ledger.
Mr. Uchit Sheth, the counsel appearing for the writ applicants vehemently submitted that his clients were unable to file the return for the month of September, 2021 because of the negative block in the ledger. He would submit that his clients would immediately be liable to an additional amount of tax equivalent to the negative block even without any adjudication if they would proceed to file such a return.
He submitted that the negative block of electronic credit ledger with Nil balance in the credit ledger as on the date of the imposition of the block is wholly without jurisdiction and beyond the scope of Rule 86-A of the GST Rules.
The division bench of Justice J.B.Pardiwala and Justice Nisha M. Thakore has ruled that the respondents are directed to withdraw negative block of the electronic credit ledger at the earliest.
The court ruled that the condition precedent for exercise of power under Rule 86A of the GST Rules is the availability of credit in the electronic credit ledger which is alleged to be ineligible. If credit balance is available, then the authority may, for reasons to be recorded in writing, not allow the debit of amount equivalent to such credit. However, there is no power of negative block for credit to be availed in future. The writ applicants are also entitled to the refund of Rs.20 Lakh deposited by them to enable them to file their return. The respondents shall refund this amount of Rs.20 Lakh to the writ applicants within a period of two weeks from the date of the receipt of the writ of this order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
