2023 (3) TMI 872 - HC - GST

Tax Credit Ledger Unblocked: Rule 86A Allows Restoration of Input Tax Credit After One-Year Suspension

HC ruled in favor of petitioner, directing respondents to unblock input tax credit ledger of Rs.95,50,660. The court noted Rule 86A guidelines allowing ... Blocking of Input Tax Credit (ITC) for more than one year - Since the petitioner was not getting figures of its output liability which could have been set off with the inputs available, the petitioner filed monthly GSTR-3B as NIL for the financial year 2017-18 (Annexure P-9) as well as for the financial year 2018-19 to avoid late fee. - Subsequently, the petitioner claimed its total input tax credit in the month of August 2019 in Form GSTR-3B. Seeking writ of certiorari (a writ issued by a superior court for the reexamination of an action of a lower court) - Constitutional Validity of amendment dated 09.10.2019 (Annexure P-7) amending Rule 61 of the Central GST Rules, 2017 with retrospective effect from 01.07.2017 - seeking unblocking of credit HELD THAT:- A perusal of the notification dated 02.11.2021 issued by Govt. of India Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs shows that the Department has laid down guidelines for disallowing debit of electronic credit ledger under Rule 86A of the CGST Rules, 2017. The detailed guidelines have been issued whereby powers under Rule 86A can be exercised by the Officers on the monetary limits prescribed under Rule 31. Since the guidelines are very clear that after one year, the registered person would be able to debit input tax credit so disallowed. This petition, at this stage is being disposed of by giving direction to the respondents to unblock the credit ledger of the petitioner which has been blocked vide Annexure P-14 and P-15 as period of 3 years have expired on 28.01.2023 after the credit ledger was blocked on 28.01.2020 (Annexure P- 15) - challenge to the vires of Rule 61 of the Central GST Rules, 2017 (Annexure P-7) and notification dated 10.09.2018 (Annexure P-5) shall remain open. Application disposed off. Issues:Challenge to the amendment of Rule 61 of the Central GST Rules, 2017 with retrospective effect and the blocking of input tax credit by respondent No. 4.Analysis:The petitioner sought a writ of certiorari to challenge the amendment dated 09.10.2019, which retroactively amended Rule 61 of the Central GST Rules, 2017, and requested the unblocking of credit amounting to Rs.95,50,660. The petitioner faced difficulties in determining output liability due to delays in bill approvals by the Irrigation Department, leading to filing NIL GSTR-3B for 2017-18 and 2018-19. Subsequently, the petitioner claimed input tax credit in August 2019 and filed annual returns for 2017-18. The respondent blocked the credit on 28.01.2020, citing discrepancies between GSTR 3B and GSTR 2A for July to September 2019.The petitioner filed a reconciliation statement in Form GSTR 9C as the turnover exceeded Rs.2 crores for 2017-18. Respondent No. 3 issued a notice regarding liability differences in GSTR 3B and GSTR 1 for October to December 2019. The petitioner requested credit unblocking via email to the Superintendent (AE), CGST Commissionerate, Rohtak. The case progressed with a notice of motion issued on 07.08.2020, a written statement filed by respondents No. 1, 3, and 4 on 14.01.2021, and a replication by the petitioner. During the hearing on 16.02.2023, the petitioner's counsel referred to a notification stating that credit ledgers cannot be blocked for more than one year.The Court noted the guidelines under Rule 86A of the CGST Rules, 2017, allowing the debiting of blocked credit after one year. Given that three years had passed since the blocking of the credit ledger, the Court directed the respondents to unblock the petitioner's credit ledger. The challenge to the vires of Rule 61 of the Central GST Rules, 2017, and the notification dated 10.09.2018 was kept open for future consideration.