TaxTMI 
TaxTMI 
2025 (10) TMI 489
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....t Ledger was "Nil". Therefore, Mr Parmeet Singh, the learned Counsel for the Petitioner, urged that the Respondent was not entitled to invoke the provisions of Rule 86-A and such invocation was ultra vires. He relied on the decision Gujarat High Court in the case of Samay Alloys India Pvt Ltd Vs State of Gujarat Special Civil Application No. 18059 of 2021 decided on 03/02/2022, the decision of the Telangana High Court in the case of Laxmi Fine Chem Vs Assistant Commissioner Writ Petition No. 5256 of 2024 decided on 18/03/2024 and the decisions of the Delhi High Court in the cases of Best Crop Science Pvt Ltd through Authorised Representative Vs Principal Commissioner, CGST Commissionerate, Meerut & Ors Writ Petition (c) 10980/2024 & Ors decided on 24/09/2024 and Karuna Rajendra Ringshia Proprietor R R Enterprises Vs Commissioner of Central Goods and Service Tax & Ors Writ Petition (c) No. 7250/2024 decided on 21/10/2024 to support his contention. 5. Ms Chavan, the learned Additional Government Pleader, submitted that on a proper reading and construction of Rule 86-A, it was apparent that the blocking could not be restricted only to the amount available in the Electronic Credit L....
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....rescribed 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 that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit. (3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction." 9. On a plain reading of the above Rule, it does appear that the powers of blocking the utilisation of ITC in ....
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....hakore, has analysed the provisions of Rule 86-A in detail and rejected contentions almost identical to those now raised by Ms Chavan before us. The Court has held that if no input tax credit was available in the ledger, the blocking of the electronic credit ledger under Rule 86-A and insertion of a negative balance in the ledger would be wholly without jurisdiction and illegal. The Court held that on a plain reading of the opening part of Rule 86-A (1), powers can be exercised only if the credit of input tax is available in the electronic credit ledger and not when there is nil credit in the ledger. 14. The argument about the Rule being rendered otiose or toothless was considered in detail by the Gujarat High Court in paragraphs 38 to 44, and the said paragraphs are transcribed below for the convenience of reference:- "38. The revenue may legitimately argue that such an interpretation may make the entire Rule 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 inter....
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....ernment. 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. Furthermore, the Government can also provisionally attach any property, including bank account, belonging to the taxable person under Section 83 of CGST Act. 43. Accordingly, the fact or possibility of registered person availing and utilising the fraudulent credit persistently and continuously cannot be the basis to invoke Rule 86A. 44. The power to restrict debit from the electronic credit ledger is extremely harsh in nature. The rule outreaches the detailed procedure provided in the legislature for determination of input tax credit wrongly availed or utilised provided in Section 73 and 74 of CGST Act and empowers the officer to unilaterally impose certain restrictions in compelling circumstances. In other words, Rule 86A is invoked at a stage which is anterior to the finalization of an assessment or the raising of a....
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....se of blocking of CGST credit availed fraudulently, blocking of SGST credit shall not be done if no credit is available in the CGST tax head. As such, for blocking of IGST credit availed fraudulently, if there is no credit balance in IGST tax head, the amount equivalent to the credit fraudulently availed can be blocked from the ITC credit available in CGST head and/or SGST head and vice versa. 18. The Gujarat High Court also held that blocking of credit was only a temporary measure, and the Revenue is not rendered remediless merely because Rule 86-A is confined to the blocking of credit available in the Electronic Credit Ledger and not future credit that might be available in the Electronic Credit Ledger. The admissibility of Input Tax Credit can be verified through the issuance of a show-cause notice and, thereafter, through the adjudication of the liability. The authorities have ample powers of recovery, including the power to provisionally attach under Section 83 of the CGST Act. However, the power under Rule 86-A cannot be invoked in the absence of any credit balance in the Electronic Credit Ledger. The Gujarat High Court allowed the Petition and directed the Respondents to ....
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.... credence to the words "has been fraudulently availed or is ineligible". 23. The Calcutta High Court has held that it is a duty of the Court to examine the true intention of the legislature. In this case, the true intention was to block the Electronic Credit Ledger where ITC was availed of fraudulently or where the assessee was ineligible to avail of it. Any interpretation which would hamper such an intention should not be adopted. 24. As noted earlier by us, the first duty of the Court is to interpret the words of the statute as they read or stand, when such words are plain and unambiguous. The intention of the legislature must be gathered from the language used in the statute. G.P. Singh's locus classicus on the Interpretation of Statutes explains this principle by reference to several decided cases. 25. In Crawford Vs Spooner (1846) 6 Moore PC 1 and Lord Howard De Walden Vs Inland Revenue Commissioners (1948) 2 All ER 825 (HL). It was held that the Courts can neither aid the legislature's defective phrasing of the act nor add or mend and, by construction, make up deficiencies which are left there. It is contrary to all rules of construction to read words into an act unl....
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....IS, C.J. in Mattison v. Hart, (1854) 14 CB 357: (1854) 23 LJCP 108, p. 114. In Becke v. Smith, (1836) 150 ER 724, p. 726, also PARKE, B (before he became LORD WENSLEYDALE) referred to the rule laid down by BURTON, J., in Warburton v. Loveland, supra, and called it a "very useful rule in the construction of a statute".]. 28. For a further statement of the rule, one may refer to the speech of LORD SIMON OF GLAISDALE in a case where he said: "Parliament is prima facie to be credited with meaning what is said in an Act of Parliament. The drafting of statutes, so important to a people who hope to live under the rule of law, will never be satisfactory unless courts seek whenever possible to apply 'the golden rule' of construction, that is to read the statutory language, grammatically and terminologically, in the ordinary and primary sense which it bears in its context, without omission or addition. Of course, Parliament is to be credited with good sense; so that when such an approach produces injustice, absurdity, contradiction or stultification of statutory objective the language may be modified sufficiently to avoid such disadvantage, though no further" [Suthendran ....
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....e case falls clearly within the statutory provisions. No tax can be levied by inference, analogy, or presumed legislative intent. The Court held that if the revenue convincingly demonstrates that the case falls strictly within the law's provisions, the subject can be taxed. Conversely, if the case does not fall within the boundaries of the taxing statute, no tax can be imposed through inference, analogy, or by attempting to decipher legislative intent or examining the substance of the matter. 31. Since the Calcutta High Court decision in the case of Basanta Kumar Shaw (supra) has emphasised the presumed legislative intent, thereby paying less credence to the actual words used in Rule 86-A, we prefer to follow the views of the Gujarat High Court and Delhi High Court regarding the interpretation of Rule 86-A. Such interpretation aligns with the plain reading of the Rule as it stands without any additions or substitutions or without any undue emphasis on the presumed legislative intent. 32. However, at the request of Ms. Chavan, we clarify that Rule 86-A allows for the blocking of the Electronic Credit Ledger only to the extent of the credit available in it at the time of exerci....