2023 (1) TMI 1488 - HC - GST

Question whether Electronic Credit Ledger blocks apply to existing and future credits raises major issue; matter referred for larger bench

HC held that issues concerning blocking of the Electronic Credit Ledger - specifically whether only existing ECL balances or also future credits can be ... Blocking of the Electronic Credit Ledger (ECL) - blocking on the ground that the input tax credit claimed by the assessee was not admissible for various reasons - whether the amount existing in credit of the ECL can only be blocked or even the future credits as well to the extent of the non admissible input tax credit in the hand of the assessee, in view of the Department, can be blocked? - HELD THAT:- Considering the issues involved, which may be effecting large number of assessees and the earlier view expressed by Division Bench of this Court, the matters need be considered to a larger Bench. Let the matters be placed before Hon'ble the Chief Justice, on administrative side, for constitution of larger Bench. Primary issue is whether blocking of the Electronic Credit Ledger (ECL) can extend beyond credits then reflected to also cover 'future credits' to the extent of allegedly inadmissible input tax credit. Petitioners contend blocking is provisional and assessment and recovery must follow statutory procedure (notably Section 49, CGST Act, 2017). Division Bench precedent (R.M. Dairy Products LLP; follow-up in M/s Samagrah Metal Trading Co.) held that even future credits 'can also be blocked' where existing ECL balance is insufficient. Contrasting authority (Samay Alloys India Pvt. Ltd.) interprets Rule 86A and holds only the 'amount available in the ECL' at the time of blocking may be put under lien, not future credits. Petitioners further assert that blocking prevents filing returns (system treating negative ECL as tax due), risks registration cancellation under Section 29 and may impinge Article 19(1)(g) rights. Given conflicting authorities and potential widespread impact, matter is referred to a larger Bench for authoritative determination.