Electronic credit ledger blocking under Rule 86A is temporary and cannot continue beyond the one-year statutory limit.

Rule 86A permits temporary blocking of debits in the electronic credit ledger where input tax credit is believed to be fraudulently availed or otherwise ineligible, and the restriction must be lifted once the disqualifying conditions no longer exist. Sub-rule (3) imposes an outer limit by providing that the restriction ceases after one year from the date of imposition. On that footing, continued blocking beyond twelve months is impermissible and the ledger restriction is deemed to have expired automatically after the prescribed period.

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Issues: Whether the blocking of the electronic credit ledger could continue beyond one year under Rule 86A of the Central Goods and Services Tax Rules, 2017.

Analysis: Rule 86A authorises temporary disallowance of debit in the electronic credit ledger where the Commissioner or authorised officer has reason to believe that input tax credit has been fraudulently availed or is ineligible. The rule also permits the restriction to be lifted when the disqualifying conditions no longer exist. Crucially, sub-rule (3) fixes an outer limit by providing that the restriction shall cease to have effect after one year from the date of its imposition.

Conclusion: Continued blocking beyond one year is impermissible and the restriction is deemed to have ceased after the expiry of twelve months from 21.11.2024.

Ratio Decidendi: A restriction imposed on use of the electronic credit ledger under Rule 86A is inherently temporary and cannot survive beyond the one-year period prescribed by sub-rule (3).

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