The Delhi High Court ( HC ) has held that immediate re-blocking of the Goods and Service Tax ( GST ) Input Tax Credit ( ITC ) ledger after 1 year is prima facie overreach of Rule 86A(2) ) of the Central Goods and Services Tax Rules, 2017.
Namoshivai Apparels Pvt Ltd, the petitioner questioned whether the respondent can continue blocking the Input Tax Credit beyond the period of one year by unblocking it after the expiry of one year and immediately blocking it thereafter.
Rule 86A of CGST Rules, 2017 empowers the Commissioner or its authorized officers to disallow debit of electronic credit ledger and block the credit based on a reasonable belief that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible. Sub-rule (3) of the said Rule stipulates that the ITC so blocked shall cease to have effect after the expiry of a period of one year from the date of blocking in case no action has been taken by the officers.
The Taxpayer’s ITCs would have been blocked by the Proper Officers on account of some mismatches/investigation/non-existence or receipt of alert notices etc. from other state/central jurisdiction authorities, regarding the taxpayers
A two-bench member comprising Justice Vibhu Bakhru and Justice Amit Mahajan observed that the same would amount to overreaching the provisions of Rule 86A(2) of the Central Goods and Services Tax Rules, 2017.
The restrictions imposed under Rule 86A of the CGST Rules cannot extend beyond the period of one year from the date of imposing the such restriction. The immediate blocking of ITC is not valid.
The Counter affidavit, if any can be filed within a period of two weeks and the rejoinder, if any, be filed within a period of one week thereafter. The Court held that no further time will be granted to the parties to complete the pleadings.
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