GST Authority ordered to unblock ITC of Rs. 1.17 crore by Bombay HC after 1 yr of limitation

After one year of restriction, the Bombay High Court ordered the GST Authority to unlock ITC worth Rs. 1.17 crores available in its electronic credit ledger.

Mr. Prakash Shah, counsel for the petitioner, Advent India PE Advisors Private Limited, cites rule 86A of the Central Goods and Services Tax Rules, 2017, and in particular sub-rule (3), which states that restrictions imposed under sub-rule (1) will cease to have effect one year after the date of imposition. In Exhibit A, he claims that the input tax credit was disallowed on January 26, 2020, and that because more than 20 months have passed, the petitioner is entitled to the relief sought in this writ petition by operation of law.

Ms. Sangeeta Yadav, representing the respondents, has presented us with the written instructions she received from the respondent, the Deputy Commissioner, in which it was stated that “This Department has consistently asked the taxpayer for submissions required for due verification of the Credit availed.” However, the taxpayer received the first incomplete submission on March 17, 2020. The Department was in contact with the taxpayer in order to get reconciliation statements for the discrepancy in their GST returns, namely GSTR-2A and GSTR-3B, from FY 2017-18 to FY 2020-21. The department’s most recent letter to taxpayers was dated May 31, 2021, and it requested a reconciliation of the ITC reported in monthly returns and annual filings. However, the taxpayer’s response is still pending. Instead of providing the requested documentation, the taxpayer filed a writ petition. This office is following the proper process for verification and unblocking on a priority basis, and if any inconsistency in the Credit availment is discovered, a Show Cause Notice (SCN) will be sent to the taxpayer, and the Input Tax Credit will be unblocked immediately.

Ms. Yadav’s submission stated that after the verification procedure was completed, the input tax credit will be unblocked.The division bench, led by Chief Justice Deepankar Dutta and Justice M.S. Karnik, stated that, in light of the statutory mandate in sub-rule (3) of rule 86A, the petitioner is entitled to claim that the input tax credit should have been unblocked immediately after the restriction was imposed under sub-rule (1) thereof. If the respondents truly believed that the petitioner was not working with the department, they should have taken legal action against it. However, claiming that a response is awaited and hence that the ban has not been lifted is clearly illegal.

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