2024 (5) TMI 509

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....Dwarkanath, learned Senior Counsel appearing on behalf of Mr. Siddharth Gilda, learned counsel for the petitioner, Mr. Swaroop Oorilla, learned Special Government Pleader for respondent Nos. 1 and 2 and Mr. Rajesh Reddy, learned counsel representing Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India for respondent No. 3. Perused the material available on record. 2. The instant writ petition has been filed assailing the action on the part of the respondents in blocking the input tax credit against the petitioners to the tune of Rs. 50,06,000/-, vide order dated 06.02.2024, for the period from 01.02.2024 to 13.02.2024. 3. The said action on the part of the respondents has been challenged on two primary grounds; firstly, that ....

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....ule 86A toothless as parties can claim and immediately utilise the credit fraudulently availed by filing monthly returns. Accordingly, it may be practically impossible to invoke Rule 86A in large number of cases. This may be the actual implication of the present interpretation, however, the Government in its wisdom has framed Rule 86A and this rule is not framed to recover the credit fraudulently availed. In case where credit is fraudulently availed and utilised, appropriate proceeding under the provisions of section 73 or section 74, as the case may be, can be initiated. Secondly, Rule 86A is not the rule which provides for debarring the registered person from using the facility of making payment through the electronic credit ledger. In ca....

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....istence of such credit in the electronic credit ledger. 42. A doubt may also arise that a registered person may persistently and continuously avail and utilise the fraudulent credit and in such scenario the strict interpretation of Rule 86A will defeat the underlying purpose of enacting such a preventive provision. In this regard. Rule 86A is not the only measure available with the Government. The Government can certainly initiate proceedings under the provisions of section 73 or section 74, as the case may be, for recovery of credit wrongly claimed. Further, the Government in an appropriate case may initiate proceeding for Cancellation of registration (either of the supplier of the recipient or both) under Section 29 of CGST Act. Further....

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....here is no power of negative block for credit to be availed in future. The writ applicants are also entitled to the refund of Rs. 20 Lakh deposited by them to enable them to file their return. The respondents shall refund this amount of Rs. 20 Lakh to the writ applicants within a period of two weeks from the date of the receipt of the writ of this order. 6. The plain perusal of the impugned order under challenge in this writ petition also would show that the respondents have made an negative credit of Rs. 50,06,000/- in the electronic credit ledger of the petitioner which otherwise is not permissible and what is permissible is only blocking the availing of the input tax credit to whatever is in credit of the petitioner. 7. Taking into con....