AI Drafter 
TaxTMI 
TaxTMI 
2024 (12) TMI 143
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....;s ECL has been blocked without the availability of any credit, which is totally contrary to the provisions of Rule 86A of GST Rules, 2017. The intimation for blocking of ECL was issued on the following dates: Date of blocking orders Amount blocked 24.06.2024 Rs.72,902/- 09.09.2024 Rs.37,09,376/- Rs.1,55,22,210/- 10.09.2024 Rs.45,36,666/- Rs.9,77,410/- 2.2 All the above blocking orders were issued by the 2nd respondent. Subsequent to the said blocking orders, the impugned intimation was issued by the 1st respondent in Form ASMT-10 dated 26.09.2024, which is pertaining to the issue of wrongful availment of ITC to the extent of a sum of Rs. 13,10,44,864/-. 2.3 He would submit that the Central Authorities had already conducted the investigation at the petitioner's premises and found that till March, 2024, the petitioners had wrongfully availed a sum of Rs. 6.3 Crores as ITC. Accordingly, the Central Authorities had issued summons with regard to the wrongful availment of ITC to the extent of Rs. 6.3 Crores and subsequently, freezed the bank accounts of the petitioners. Thereafter, the petitioner paid a sum of Rs. 1.3 Crores as GST to show their b....
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....s India Pvt. Ltd., vs. State of Gujarat reported in 2022 (61) GSTL 421 (Guj.) and also the judgement of High Court of Delhi in Best Crop Science Pvt. Ltd., vs Principal Commissioner, CGST Commissionerate reported in (2024) 22 Centax 531 (Del.). 2.8 He would also insist that the State Authorities will not have any jurisdiction when the Central Authorities have already initiated the proceedings on the same issue. Therefore, he would submit that without any authority, the respondents 1 and 2 have issued the notice in Form GST ASMT-10 on 26.09.2024 and passed blocking orders on 24.06.2024, 09.09.2024 and 10.09.2024. Hence, he prayed this Court to allow this writ petition. Further, he would submit that now, due to the blocking of credit, the petitioners are not in a position to utilise the credit available in the ECL to an extent of Rs. 2.48 Crores/-. 3. Per contra, the learned Additional Government Pleader appearing for the respondents had strongly opposed the submissions made by the learned Senior counsel for the petitioner and would submit as follows: 3.1 Initially, the Central Authorities has initiated the proceedings pertaining to the period till March, 2024 for the wrongf....
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....on the wrongful availment of credit to the extent of a sum of Rs. 13.10 Crores, the blocking orders were issued to the extent of Rs. 2.48 Crores/-, which was the credit available and debited from the ECL. On the other hand, the Central Authorities will not have any power to issue the blocking orders since the petitioner is a State allotted taxable person. This legal position is admitted on either side and therefore, he would submit that once if any wrongful availment of credit came to the knowledge of State Authorities, though the jurisdiction was already exercised by the Central Authorities, still the State Authorities have power to pass blocking orders to protect the revenue of the State. Therefore, at any cost, the issue pertaining to concurrent jurisdiction for initiation of the proceedings cannot be linked with blocking of ECL by the State Authorities. Accordingly, he justified the initialisation of proceedings and issuance of ASMT-10 and blocking of ECL of the petitioner by the State Authorities. 3.5 The learned counsel appearing for the Central Authorities would submit that subsequent to the search conducted by the Central Authorities, the Directors were arrested and now ....
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....10 Crores. Though the issue raised by the Central Authorities and State Authorities is similar, the quantum of amount demanded by them are entirely different and the period of demand also differs. Thus, the question of cross-empowerment would not arise. Therefore, to the extent of difference in amount and period, the State Authority will have power to issue Form ASMT-10 and hence, the State Authorities will certainly have power to impose further prosecution for the issues, which are left out by the Central Authorities. 6.4 At the time of issuance of ASMT-10 by the State Authorities, i.e., 26.09.2024, only the search was conducted by the Central Authorities and no notice was issued by them with regard to the wrongful availment of a sum of Rs. 13.10 Crores. Therefore, under these circumstances, one cannot assume or presume that in the present case, the cross empowerment will come into picture against the State Authorities. However, now, the Form GST DRC-01A was issued by the Central Authorities on 08.10.2024 with regard to the wrongful availment of ITC for a sum of Rs. 13.10 Crores up to the month of September, 2024. Due to this development, certainly, the State Authorities cannot....
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....nt prescribed under rule 36- i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or ii. without receipt of goods or services or both; or b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. (2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied th....
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....e been (supported by reason to believe recorded in writing) fraudulently availed. 34. Accordingly, in case where (i) Credit of input tax is not available in the electronic credit ledger or (ii) such credit has already been utilised, the powers conferred under Rule 86A cannot be invoked. (Emphasis supplied) 7.5 At paragraph 34 of the above judgement, the Hon'ble Division Bench of Gujarat High Court has arrived at a conclusion that the power conferred under Rule 86A to block the credit cannot be invoked by the State Authorities in the case, where i) Credit of ITC is not available in ECL or ii) Such credit has already been utilised. 7.6 A similar view was also taken by the Hon'ble Delhi High Court in Best Crop case, wherein, it was held as follows: "56. On a plain reading of the opening sentence of Rule 86A(1) of the Rules, the necessary conditions to be satisfied at the threshold are: (a) that there is a credit of input tax available in the Electronic Credit Ledger; and, (b) that the Commissioner or an officer authorized on his behalf has reasons to believe that the credit of input tax available has been fraudulen....
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....bit of an amount equivalent to such credit available in electronic credit ledger for discharge of liabilities under Section 49", which means the Officers have to record the reasons in writing not to allow the debit of amount equivalent to such credit for discharge of liabilities under Section 49. The word "amount equivalent to such credit for discharge of liabilities" would mean that not only the fraudulently availed ITC amount available in the ECL, but an amount equivalent to fraudulently availed credit utilised for discharge of liabilities under Section 49. 7.11 Thus, a conjoint reading of 1st and 2nd parts of Rule 86A would clearly reveal that the word "available in the ECL" referred in 1st part would mean that the amount available after the fraudulent availment of credit at any point of time, whether it was available in the ECL or utilised at the time of passing the blocking orders. Hence, the 2nd part of Rule 86A empowers the Authorities not to allow the debit of amount equivalent to the fraudulently availed credit for discharge of liabilities under Section 49. If it was already utilised, the Officials are also empowered to pass blocking orders to the extent of amount equiv....
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.... availment of ITC, if the same was available in ECL, for debit, at any point of time, the Department is entitled not to allow the debit of amount equivalent to such credit in ECL whether it is utilised or not and in the event, if the ITC was utilised upto the accumulation of credit to the extent of fraudulently availed/utilised credit. 7.17 In a Statute, if the literal interpretation of a portion of Rule which would defeat the object of the said Rule, the same has to be interpreted in entirety. In such event, if the interpretation of whole Rule exhibits the object and purpose of the legislature and beneficial for the Revenue, the interpretation of Rule in entirety will supersede the interpretation, which was made with a portion of the Rule. 7.18 Further, in the provisions of Rule 86A, nowhere it has been stated that the negative blocking is prohibited. When the Statute has not stated anything in the statutory term, it has to be construed that the word "blocking" includes both positive and negative blocking. If the intention of the legislature is not to allow the negative blocking, they are supposed to have specifically prohibited the same by virtue of proviso or otherwise. In....
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....ns of Rule 86A of GST Rules. The blocking of ITC can be made to the extent of wrongful availment of credit, for which Rule 86A empowers State Authority not to allow debit of the amount equivalent to such wrongful availment of credit to the extent of available ECL at any point of time. Therefore, at the time of blocking, the availability of ITC in the ECL is immaterial. The blocking orders would cover both the amount available in the ECL at the time of passing orders and the amount to be accumulated subsequently into the ECL to the extent of the amount mentioned in the blocking order. Thus, the Authorities are empowered to pass the blocking orders, in the present case, up to the maximum extent of a sum of Rs. 13.10 Crores towards the wrongful availment of credit. 8. ISSUE No.3 - Whether the issuance of Form GST DRC-01A pertaining to a sum of Rs. 71,798/- and remitting of the said amount by virtue of Form GST DRC03 and dropping of proceedings would amount to determination of the entire issue in Form GST ASMT-10? 8.1 With regard to the issuance of GSTR DRC-01A by the Authorities concerned, the same is pertaining to Rs. 71,798/- alone, which is relating to the intimation of block....