GST Department directed to unblock credit ledger until appropriate reasons for invoking Rule 86A are not furnished

The present litigation with High Court is:

The Input Tax Credit (ITC) balance available in the electronic credit ledger (ECL) of the writ applicant as on the date of blocking was Rs.10,68,613/-. The negative balance of Rs.25,58,831/- was inserted in the electronic credit ledger. Mr. Sheth (Counsel of Petitioner) submitted that even if some GST demand is proposed against the writ applicant, the writ applicant would participate in the adjudication proceedings and any amount ultimately held payable would be paid by the writ applicant. He further submitted that inserting of negative balance of Rs. 25,58,831/- in the electronic credit ledger is otherwise also illegal and without jurisdiction in view of the recent pronouncement of this Court in the case of Samay Alloys India Pvt. Ltd. vs. State of Gujarat [Special Civil Application No. 18059 of 2021 decided on 3rd February 2021].

Order of Court:

4 We dispose of this writ application directing the respondent No.3 to remove the negative balance of Rs.25,58,831/- in the electronic credit ledger so as to enable the writ applicant to file his returns. The negative balance shall be removed within a period of one week from the date of receipt of the writ of this order.

5 It is not in dispute that till this date, no reasons have been assigned by the respondent No.3 for blocking the electronic credit ledger. As noted above, the balance available in the electronic credit ledger is of Rs.10,68,613/-.

6 The respondent No.3 shall furnish reasons for invoking Rule 86A of the Rules, 2017 for the purpose of blocking of the electronic credit ledger so that the writ applicant can meet with the same. Till an appropriate reasoned order is not passed, the writ applicant shall retain the balance of Rs.10,68,613/- in its electronic credit ledger.