Blocking of ITC when credit not available in ledger is without jurisdiction and illegal: HC

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  • Last Updated on 22 February, 2022

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Input tax credit - Blocking use of credit ledger; GST Block Credits

Case Details: Samay Alloys India (P.) Ltd. v. State of Gujarat - [2022] 135 taxmann.com 243 (Gujarat)

Judiciary and Counsel Details

    • J.B. Pardiwala and Ms. Nisha M. Thakore, JJ.
    • Uchit N. Sheth for the Petitioner.
    •  Utkarsh Sharma, LD. AGP for the Respondent.

Facts of the Case

The petitioner was filing GST returns and noticed that the portal displayed a message that the electronic credit ledger had been blocked. Despite the fact that there was no credit balances in the electronic credit ledger, ITC was blocked and negative balance was entered. It filed writ petition challenging the same.

High Court Held

The Honorable High Court observed that Rule 86A allows proper officer to disallow debit from Electronic Credit Ledger (ECL) for limited period of time and not to make debit entries in ECL. But the department has no power to negatively block credit to be availed in future. If credit is fraudulently availed and utilised then appropriate proceeding under Section 73 or 74 can be initiated but not under Rule 86A. Therefore, it was held that blocking of ECL under Rule 86A and insertion of negative balance in ledger when no ITC was available was without jurisdiction and illegal.

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