ITC in ECRL Blockage Beyond One Year Not Permissible: Punjab & Haryana HC Orders Decision on Unblocking ITC Within One Week [Read Order]

The Punjab & Haryana High Court has reiterated that Input Tax Credit (ITC) blocked in the Electronic Credit Ledger (ECRL) under Rule 86A(3) of the CGST ( Central Goods and Services Tax ) Rules, 2017 cannot remain frozen beyond the statutory period of one year. The Court directed the authorities to decide on unblocking the petitioner’s ITC within one week.

The petitioner, M/s Mahadev Steel Industries, approached the High Court seeking directions for unblocking ITC amounting to ₹33,80,886/- which had been frozen by the tax authorities on 25.06.2024 under Rule 86A(3) of the CGST Rules. The firm contended that the restriction had already continued for more than one year, contrary to the explicit statutory limitation provided under the Rules.

The petitioner’s counsel argued that Rule 86A(3) specifically provides that such restrictions on utilizing ITC cannot extend beyond one year. Therefore, once the period expired, the authorities were bound to release the blocked credit automatically or by passing a necessary order.

Appearing for the Revenue, the Senior Standing Counsel submitted before the Court that the case of the petitioner would be duly considered, and the request for unblocking the ITC would be examined as per law.

The Division Bench comprising Justice Anupinder Singh Grewal and Justice Deepak Manchanda noted that the grievance of the petitioner was limited to the statutory cap of one year on blocking ITC. Since more than one year had already elapsed, the Court held that the continued restriction was not permissible.

Accordingly, the Bench disposed of the writ petition by directing the tax authorities to consider and decide the petitioner’s request for unblocking ITC and pass an appropriate order within one week.

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