HC Slams Authorities for Passing Order to Replenish ECL with ITC That Was Wrongly Availed

Case Details: Best Crop Science (P.) Ltd. v. Principal Commissioner, CGST Commissionerate - [2024] 166 taxmann.com 654 (Delhi)

Judiciary and Counsel Details

• Vibhu Bakhru & Sachin Datta, JJ.
• Himanshu Tyagi, Jitin Singhal, Vibhooti Malhotra, Bhuvnesh Satija, Udit Sharma, Mohit Gupta, Rajesh Mahna, Ramanand Roy, Mayank Routs, Ms Silky Wadhwa, Shiva Narang, Rakesh Kumar, Praveen Kumar & Atul, Advs. for the Petitioner.
• Harpreet Singh, SSC, Ms Suhani Mathur, Jatin Kumar Gaur, Advs., Anurag Ojha, Sr. SC and Subham Kumar, Kumar Abhishek, Dipak Raj Singh, Advs., R. Ramchandran, Sr. SC, Rajeev Aggarwal, ASC, Ms Shaguftha Hameed, Prateek Badhwar, Shubam Goel, Abhinav Kalia & Ajit Kumar Kalia, Advs. for the Respondent.

Facts of the Case

In the present case, the order was passed by Commissioner under Rule 86A of the CGST Rules, 2017 to block the input tax credit in excess of the credit available in Electronic Credit Ledgers. The petitioner filed writ petition and contended that till the negative balance in the ECL of the petitioner is not extinguished by further addition (credit) of ITC in the ECL, the petitioner is disabled to utilize the ITC availed by it for payment of its dues.

High Court Held

The Honorable High Court noted that Rule 86A of CGST Rules is not a machinery provisions for recovery of tax or dues under CGST Act, 2017. It is an emergent measure for protection of revenue by temporarily not allowing debit of available ITC in ECL, which Commissioner or an officer authorized by him has reasons to believe has been wrongfully availed.

Thus, rule 86A(1) of CGST Rules does not contemplate an order, effect of which is to require a taxpayer to replenish his ECL with valid availment of ITC, to extent of ITC used in past, which Commissioner or an officer authorized by him has reasons to believe, was fraudulently availed or was ineligible. Therefore, the Court held that the order disallowing debit from ECL of petitioner, in excess of ITC available in ECL at time of passing of impugned order to be set aside.

List of Cases Reviewed

• Samay Alloys India (P.) Ltd. v. State of Gujarat [2022] 135 taxmann.com 243 (Gujarat) (para 76)
• Laxmi Fine Chem v. Assistant Commissioner [2024] 161 taxmann.com 270 (Telangana) (para 76) followed.

List of Cases Referred to

• Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company & Ors (2018) 9 SCC 1 (para 10 and 16)
• ALD Automotive Pvt. Ltd. v. Commercial Tax Officer now upgraded as Asstt. Commissioner (CT) & Ors (2019) 13 SCC 225 (para 15)
• Jayam & Company v. Asstt. Commissioner & Anr (2016) 15 SCC 125 (para 43)
• Baidyanath Ayurved Bhawan (P) Ltd. v. Excise Commr. (1971) 1 SCC 4 (para 48).