2025 (11) TMI 1784

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... 3. The Petitioner challenges the communication/order dated 8 January 2025 made in the purported exercise of powers conferred by Rule 86A of the Central Goods and Services Tax Rules, 2017, blocking the use of Input Tax Credit (ITC) in the Petitioner's electronic ledger to the extent of Rs. 2.66 Crores. 4. Admittedly, as on the date of communication/order of 8 January 2025, the ITC available in the Petitioner's electronic ledger was to the extent of Rs. 07,06,770/-. However, the impugned communication/order seeks to block ITC to the extent of Rs. 2.66 Crores. Thus, this is a case of "negative blocking" to the extent, it concerns ITC over Rs. 07,06,770/-. 5. Ms Bharucha defended the impugned communication/order based upon the argumen....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....where it was held that Rule 86A does not involve the recovery of tax due from an assessee. Instead, it allows for certain amounts to be held back and not utilized by the assessee for discharging liabilities or claiming refunds under specific conditions. This rule creates a lien without actual recovery. The respondents alleged fraudulent utilization of input tax credit because the supplier of the petitioner was found to be non-existent at the disclosed business location. The respondents had 'reason to believe that the petitioner had fraudulently availed credit. Rule 86A enables the authorized officer to prevent the debit of an amount equivalent to 'such credit,' using the term 'not allow debit.' This provision is not for re....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....r's electronic ledger to the extent it exceeds Rs. 07,06,770/-. 9. As noted above, the High Courts of Gujarat, Telangana, and Delhi have held that such negative blocking was ultra vires Rule 86A. Similarly, this Court, in the case of Rawman Metal & Alloyes Vs. Deputy Commissioner of State Tax, Thane 2025 10 TMI 489, after considering the decisions of various High Courts and after noting that Special Leave Petitions against some of them were dismissed, has also held similarly. This Court has also considered the contrary view taken by the Calcutta High Court. This view of the Calcutta High Court is similar to that of the Allahabad High Court in the case of R.M. Dairy Products LLP Vs. State of Uttar Pradesh 2021 (7) TR 4405, which is relied....