Rule 86A input tax credit blocking upheld where registered premises were not shown to host genuine business activity.

Input tax credit may be blocked under Rule 86A where the authority has reason to believe that the registered premises are not being used for genuine business activity. The enforcement enquiry found the business place not functioning at the registered address, and the materials produced by the assessee did not establish actual occupation or conduct of business; nil electricity consumption for the relevant month also supported that factual basis. Although no prior explanation was sought before the blocking communication, the later opportunity to produce documents removed practical prejudice, and the factual basis for blocking was not displaced. The blocking was upheld and remand was rejected.

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Issues: Whether the blocking of input tax credit under Rule 86A of the Central Goods and Services Tax Rules, 2017 was justified on the ground that the registered place of business was not functioning and the assessee failed to establish actual business activity there.

Analysis: The blocking of input tax credit was founded on an enforcement enquiry that found the business premises not functioning at the registered address. The assessee was given an to produce documents showing actual physical occupation and conduct of business, but the materials produced did not establish such occupation or activity. The electricity record also indicated nil consumption for the relevant month. Though no explanation had been sought before issuing the blocking communication, the subsequent opportunity afforded before the Court cured any practical prejudice, and the assessee still failed to dislodge the factual basis for the action.

Conclusion: The blocking of input tax credit under Rule 86A was upheld and the request for remand was rejected.

Final Conclusion: The appeal was dismissed, with liberty left open to seek credit for a future period in accordance with law.

Ratio Decidendi: Input tax credit may be blocked under Rule 86A where the authority has a reason to believe that the registered premises are not being used for actual business, and the Court will not interfere when the assessee fails to produce material showing genuine occupation and at the registered place.

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