2026 (1) TMI 500 - HC - GST

GST electronic credit ledger blocked beyond one year u/r 86A-blockage lifted; coercive recovery stayed temporarily.

The dominant issue was whether GST authorities could continue blocking the taxpayer's electronic credit ledger beyond the statutory one-year period after ... Search operation conducted u/s 67 - blocking of electronic credit ledger could not have continued beyond the period of one year from the date of imposition thereof - HELD THAT:- The statutory period of one year has long elapsed, blocking of the petitioner’s electronic credit ledger cannot be permitted to be continued. Accordingly, the respondents are directed to withdraw the blocking of the electronic credit ledger of the petitioner forthwith. Since, it is evident that this Court has entertained writ petitions throwing challenge to the authority of an officer of the Bureau of Investigation even in initiating adjudication proceedings and interim orders have been passed restraining the respondents from taking coercive action against the petitioner, as would be evident from order dated December 6, 2021 passed in M/s. Chatterjee Constructions [2021 (12) TMI 1000 - CALCUTTA HIGH COURT], therefore there is no reason for this Court to take a divergent view. Accordingly, it is directed the respondent GST authorities shall not take any coercive steps on the basis of the adjudication order impugned till the returnable date. Issues: (i) Whether the blocking of the petitioner’s electronic credit ledger beyond one year from imposition is permissible under Rule 86A(3) of the CGST/SGST Rules, 2017; (ii) Whether the respondents may take coercive action on the basis of the impugned adjudication order pending further proceedings.Issue (i): Whether the blocking of the petitioner’s electronic credit ledger beyond one year from imposition is permissible under Rule 86A(3) of the CGST/SGST Rules, 2017.Analysis: Rule 86A(3) provides that the restriction imposed on the electronic credit ledger shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction. The Court considered the mandatory wording of the Rule and authoritative decisions applying the same principle. The Court limited its examination to whether the statutory temporal limit prescribed by Rule 86A(3) permits continuation of the blocking beyond one year and did not undertake an evidentiary re-appraisal of the underlying facts of the search or adjudication beyond that statutory question.Conclusion: The blocking of the electronic credit ledger cannot be continued beyond one year and the respondents are directed to withdraw the blocking forthwith.Issue (ii): Whether the respondents may take coercive action on the basis of the impugned adjudication order pending further proceedings.Analysis: Having found that the statutory time-limit for the ledger restriction has elapsed and having noted prior interim orders in similar matters, the Court considered whether interim protection from coercive measures was warranted until the matter is further considered. The Court did not finally adjudicate the merits of the underlying adjudication but addressed only the propriety of interim enforcement steps pending compliance with directions and further proceedings.Conclusion: The respondents are restrained from taking any coercive steps on the basis of the impugned adjudication order until the returnable date.Final Conclusion: The Court granted interim relief to the petitioner by directing withdrawal of the expired ledger restriction and by restraining coercive action pending further proceedings; the Court ordered the respondents to file an affidavit report and listed the matter for further consideration.Ratio Decidendi: A restriction imposed under Rule 86A of the CGST/SGST Rules, 2017 ceases to have effect after one year from the date of imposition; continuation beyond that statutory period is not permissible.