HC directed dept. to unblock ECL & recover ITC with interest if payment not made to supplier

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Input tax credit; Electronic credit ledger

Case Details: Sunny Jain v. Union of India - [2022] 145 taxmann.com 601 (Delhi)

Judiciary and Counsel Details

    • Vibhu Bakhru & Purushaindra Kumar Kaurav, JJ.
    • Rajkumar, Harpreet Singh, Sr. Standing Counsel, Ms Suhani Mathur & Jatin Kumar Gaur, Advs. for the Respondent.

Facts of the Case

The Electronic Credit Ledger (ECL) of petitioner was blocked by the department for alleged non-payment of consideration to its supplier. The petitioner filed writ petition against blocking of ECL and contended that ECL could not be blocked for eighteen months as provision allows blocking same for maximum period of one year.

High Court Held

The Honorable High Court noted that as per Rule 37 of CGST Rules read with proviso to section 16(2) of CGST Act, a taxpayer is entitled to avail ITC without paying consideration to his supplier and has to reverse same if he fails to make such payment within 180 days. However, the ITC availed before making payment to supplier and expiry of period of 180 days could not make petitioner ineligible.

Therefore, the action of blocking ECL by the department for such extended period was without authority of law. The Court directed department to unblock ECL with liberty to recover ITC with interest if it was required to be included in output liability of petitioner.

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