ECL Cannot be blocked for More than One Year u/r 86A CGST Rules: Delhi HC [Read Order]

A Division Bench of the Delhi High Court comprising  Justices Prathiba M. Singh and Rajneesh Kumar Gupta has ruled that the credit ledger of an assessee cannot be blocked beyond the period of one year under rule 86A Central Goods ande Services Tax (CGST) Rules, 2017.

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A show cause notice was issued by the Directorate General of GST Intelligence upon the Petitioner on suspicion of it being a non-existing firm. Subsequently, the impugned order was passed denying Input Tax Credit to the tune of Rs.29,13,246/-.

The petitioner, Shri Sai Ram Enterprises submitted that the blocking took place for the period 1st January, 2024 to 31st November, 2024 but even at present, i.e., as on April, 2025, the same has not been unblocked. The Petitioner challenging the blocking of the Input Tax Credit ( ‘ITC’) of Rs. 3,91,23,722/- by the Deputy Director, Directorate General of GST Intelligence, Gurugram on 15th January,2024.

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Counsel for the Petitioner relies upon Rule 86A of the Central Goods and Services Tax Rules, 2017 which lays down the conditions of use of amount available in electronic credit ledger. Harpreet Singh, Counsel for Respondents submitted that the blocking may be due to the allegation of the Petitioner being a non-existing firm. However, he concedes to the fact that there can be no doubt that the blocking is for a period of one year.

Rule 86A prescribes that the Commissioner or authorised officer, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible, may for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger.

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Considering the statutory position, the blocking of the ITC was lifted by the court in view of the fact that it has been more than one year.

The court, however proceeded to grant liberty to the Revenue to take independent action against the Petitioner, if the allegation of running a bogus firm stood substantiated.

To Read the full text of the Order CLICK HERE

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