Input Tax Credit blocked for alleged immovable-property use reversed where no construction or fraud found; blocked credit to be restored.

Challenge concerned validity of a show-cause notice issued under penal recovery provisions for alleged wrongful availing and utilisation of input tax credit linked to services for immovable property construction. Applying the exclusion of input tax credit where goods or services are received for construction of immovable property, the author notes no evidence that the taxpayer undertook construction within that meaning and no finding of fraud or wilful suppression required to invoke penal Section 74(1). Because the credit had been reversed or blocked in the electronic ledger and no misuse was established, the notice is quashed and the blocked credit is to be restored.

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Issues: Whether the show-cause notice dated 28.10.2025 issued under Section 74(1) of the Goods and Services Tax Act, 2017, alleging wrongful availing and utilisation of input tax credit under Section 17(5)(d) of the Goods and Services Tax Act, 2017, is valid and whether the blocked input tax credit of Rs. 98,11,678/- should be unblocked.

Analysis: The Court examined the scope of Section 17(5)(d) which bars input tax credit in respect of goods or services received for construction of an immovable property (other than plant or machinery). The facts establish that the petitioner acquired leasehold rights and transferred sub-plots and was not shown to have undertaken any construction activity; the respondent has not demonstrated that the petitioner engaged in construction within the meaning of Section 17(5)(d). The Court further considered Section 74(1), which requires fraud, wilful mis-statement or suppression of facts to invoke the penal recovery provisions; there is no finding or contention that the petitioner committed fraud or wilful suppression. The record also shows that the petitioner had reversed an inadvertently utilised ITC and that the respondent had already blocked credit in the electronic ledger, supporting that the credit was not utilised for output tax liability at the time of blocking.

Conclusion: The impugned notice dated 28.10.2025 issued under Section 74(1) of the Goods and Services Tax Act, 2017 is quashed and set aside; the respondent is directed to unblock the input tax credit amounting to Rs. 98,11,678/- in the petitioner's electronic credit ledger and to take necessary action within three weeks. The decision is in favour of the assessee.

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