2025 (12) TMI 206

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....ioner or an officer authorized by him to block a tax payer's ECL by an amount exceeding the credit available at the time of issuance of said order?" 3. Reply on behalf of respondents stands filed. 4. Learned counsel for petitioner submits that petitioner is an active business concern registered under the provisions of Punjab Goods and Services Tax Act, 2017 (for short - 'PGST Act'). Grievance raised is that on 15.01.2025, respondent No. 2 without any prior intimation, notice and in alleged violation of principles of natural justice besides guidelines issued by Central Board of Indirect Taxes and Customs (CBIC), negatively blocked Input Tax Credit (ITC) in Electronic Credit Ledger (ECL) of petitioner under Rule 86A of Act/Rules, 2017 thus showing negative balance as reflected from copy of ECL entries attached as Annexure P-4. It is argued that the provision does not mandate or authorize blocking of ITC in excess of the ITC already available to the credit of registered dealer in its ECL. It is further submitted that an artificial negative balance is created in the petitioner's ECL which disables it from utilising the ITC availed by it for payment of its dues leading to a situat....

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....IN 03AAQC56838K1ZR). Learned counsel for respondent, on advance notice, was unable to deny that ECL of petitioner was blocked on 15.01.2025. Negative balance is thus reflected from the copy of ECL entries attached as Annexure P-4. 9. At this stage, it is relevant to refer to decision dated 04.11.2025 in the case of M/s Shyam Sunder Strips (supra) wherein judgments of Gujarat High Court in the case of Samay Alloys, of Delhi High Court, in Best Crop Science Pvt. Ltd. (supra); Kings Security Guard Services Pvt. Ltd. (supra) and Karuna Rajendra Ringshia (supra), in M/s Laxmi Fine Chem Vs. Assistant Commissioner (2024) SCC OnLine TS 2328 of Telangana High Court and of Bombay High Court in Rawman Metal and Alloys Vs. The Deputy Commissioner of State Tax, Thane, 2025 (10) TMI 489 as well as decisions of Calcutta High Court in Basanta Kumar Shaw Vs The Assistant Commissioner of Revenue, and State Tax, Tamluk Charge and others, 2022 SCC Online Cal 4544 and of Allahabad High Court in M/s. RM Dairy Products LLP Vs. State of U.P. and others, 2021 SCC Online All 1144 besides decision of High Court of Andhra Pradesh in Sugna Sponge and Power Pvt. Ltd. Vs. Superintendent of Central Tax and oth....

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....a proper officer can - a) Disallow debit from the electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. b) Such restriction should be for an amount equivalent to the amount claimed to have been fraudulently availed or is ineligible 31. Rule 86A (1) of CGST Rules, 2017 is broadly divided into two parts. The opening part of the rule deals with the conditions required to be fulfilled in order to invoke the powers under the rule. The second part of the rule provides for the consequences in case Rule 86A is invoked. 32. In other words, in case the conditions prescribed for the invocation of Rule 86A are not fulfilled, the officer cannot invoke the rule, and in such scenario, the consequences provided in the rule becomes ex-facie inapplicable. 33. One of the primary conditions in order to invoke Rule 86A is that the Credit of input tax should be available in the electronic credit ledger. Further, such credit should be claimed to have been (supported by reason to believe recorded in writing) fraudulently availed. 34. Accordingly, in case where (i) Credit of input t....

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....more, 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 demand. Accordingly, it should be governed strictly by specific statutory language which conditions the exercise of the power. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx "49. Thus, the principle of law discernible from the aforesaid two decisions of the Supreme Court is that there can be no action based on any supposed intendm....