Padmavathi Electrometals (P) Limited Vs Assistant Commissioner of Commercial Taxes
Date: June 6, 2024
Subject Matter
Rule 86A(3) allows blocking of ITC for a maximum period of one year
Summary
In this case, the petitioner sought to challenge the validity of several notices including one issued on April 21, 2023, regarding the blocking of Input Tax Credit (ITC) as per Rule 86A of the CGST/IGST Rules, 2017. The blocking of ITC was confirmed by an order dated May 19, 2023, which initiated the blockage of the Credit Ledger. The petitioner claimed that the blocking of the ITC was unlawful and pointed out that Rule 86A(3) specifies that such blocking can only last for one year. The respondent's actions were associated with the potential cancellation of the petitioner’s GST registration, although this process was put on hold pending the outcome of this case. The petitioner’s legal representative indicated that due to medical reasons, the petitioner was unable to provide a written affidavit but expressed the intent to file the necessary returns. Given that the duration for the blockage had exceeded one year as stipulated in the rules, the court decided to set aside the blocking order, thereby nullifying the impact on the petitioner’s Credit Ledger. Subsequently, the case was resolved in favor of the petitioner, effectively allowing them access to their ITC.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has sought for setting aside of the notice at Annexure-‘G’ dated 21.04.2023 as well as the notices at Annexures-‘H’ and ‘H1’, both issued in Form GST ASMT-10 in reference No.LGSTO-010/ASMT 10/BOGUS/23-24 dated 06.05.2023. The petitioner has also sought for setting side of the order at Annexure-‘K’ dated 19.05.2023.
2. The case of the petitioner is that the respondent has resorted to blocking of Input Tax Credit (ITC) in exercise of power under Rule 86A of CGST/IGST Rules, 2017 [‘the Rules’ for short].
3. The said order has come into effect from 19.05.2023. Pursuant to such proceedings, the Credit Ledger has been blocked in terms of Annexures-‘L’, ‘L1’ and 1L21 dated 20.05.2023, 03.06.2023 and 05.06.2023 respectively.
4. It is to be noticed that under Rule 86A(3) of the said Rules, the blocking of ITC is only for a period of one year.
5. Sri K. Hema Kumar, learned Additional Government Advocate appearing for the respondents submits that the proceedings have been initiated for cancellation of registration, which however has been deferred in light of the petitioner making reference to the present proceedings.
6. Learned counsel for the petitioner submits that due to medical reasons, the petitioner is not in a position to file Affidavit in writing to that effect and however on instructions, the learned counsel submits that the petitioner intends to file the returns.
7. Said submission is taken note of.
8. In view of admitted facts as notice hereinabove and the period of one year having lapsed, the blocking of ITC at Annexure-‘K’ dated 19.05.2023 has been set aside and consequently, the blocking of Credit Ledgers at Annexures-‘L’, ‘L1’ and ‘L2’ dated 20.05.2023, 03.06.2023 and 05.06.2023 are set aside.
The petition is accordingly disposed off.
HC set aside blocking of ITC as ITC cannot be blocked for more than i-ne year