2021 (6) TMI 182 - HC - GST

Court orders immediate restoration of blocked credit ledger beyond one year

The court ruled in favor of the petitioner in a case challenging the blocking of the electronic credit ledger beyond one year. The court held that as per ... Blocking of electronic credit ledger - Rule 86-A(3) of the CGST Rules, 2017 - Limitation on duration of restriction - Restoration of credit to electronic credit ledger - Assessment proceedings not precludedBlocking of electronic credit ledger - Rule 86-A(3) of the CGST Rules, 2017 - Limitation on duration of restriction - Restoration of credit to electronic credit ledger - Continuation of blocking of the petitioner's electronic credit ledger beyond one year from the date of imposition was impermissible and the continuation was set aside with directions for restoration of credit. - HELD THAT: - The electronic credit ledger was blocked on 21.01.2020. Rule 86-A(3) of the CGST Rules, 2017 mandates that a restriction imposed on the electronic credit ledger shall cease to have effect after the expiry of one year from the date of imposing such restriction. The Court declined to enter into the merits of the original blocking order but held that, as a matter of law, the restriction could not be continued beyond the one-year period. The revenue did not contest the legal proposition regarding the illegality of continuing the block beyond one year. Consequently, the respondents' continuation of the block was declared impermissible and the respondents were directed to restore the credit to the electronic credit ledger forthwith, subject to their liberty to take any action permissible in law in connection with assessment proceedings.The continuation of the blocking of the electronic credit ledger beyond one year is set aside and the credit shall be restored forthwith; respondents remain free to take lawful steps in assessment proceedings.Final Conclusion: Writ petition allowed to the extent that blocking of the electronic credit ledger beyond one year is declared illegal and the ledger credit is to be restored immediately, while preserving the respondents' right to pursue assessment action as permitted by law. Issues Involved:Challenge to blocking of credit ledger and its continuance beyond one year.Analysis:The petitioner filed a writ petition challenging the blocking of the electronic credit ledger and its continuation beyond one year. The petitioner also sought to set aside the intimation by respondent No.3 and requested direction to restore the credit to the electronic credit ledger. The petitioner highlighted that the credit ledger was blocked on a specific date and emphasized the mandate under Rule 86-A(3) of the CGST Rules, 2017, which states that the blocking of the electronic credit ledger should cease to have effect after one year from the date of imposition. The petitioner argued that the continued blocking of the credit ledger prejudiced them.The counsel for the revenue confirmed the blocking of the electronic credit ledger but could not dispute the legal contention regarding the impermissibility of continuing the blocking beyond one year as per Rule 86-A(3). The court, without delving into the merits of the initial blocking order, emphasized that as per the rule, the restriction on blocking the electronic credit ledger cannot extend beyond one year from the date of imposition. Since the blocking was initiated on a specific date, the court declared that its continuation beyond one year was impermissible under the law.Consequently, the court set aside the action of the respondents in continuing the blocking of the electronic credit ledger and ordered the restoration of credit to the ledger immediately. However, the court clarified that the respondents were within their rights to take lawful actions in connection with assessment proceedings. The petition was disposed of accordingly, with the court ruling in favor of the petitioner and directing the restoration of the credit ledger while allowing the respondents to proceed lawfully in assessment matters.