Rci Industries And Technologies LTD Through Its Director Mr Rajiv Gupta vs. Commissioner Dgst Delhi & Anr.

Facts

The petitioners, RCI Industries and Technologies Ltd. (W.P.(C) 8258/2020) and Sri Venkateshwar Tradex Private Limited (W.P.(C) 1561/2021), filed writ petitions before the Delhi High Court. They challenged orders passed under Rule 86A of the CGST and DGST Rules, which blocked their input tax credit. The petitioners argued that Rule 86A(3) limits such restrictions to one year, after which the blocking automatically ceases. The Directorate General of GST Intelligence (DGGI) had written to the DGST authorities on November 26, 2021, directing them to unblock the input tax credits as the one-year period had expired. The GNCTD counsel stated that the account for Sri Venkateshwar Tradex Private Limited had been unblocked that day and assured the court that RCI Industries and Technologies Ltd.'s account would be unblocked within 48 hours.

Held

The Court accepted the statements and undertakings given by the counsel for the GNCTD. The respondent was held bound by these assurances. The counsel for the DGGI had also indicated that a letter dated November 26, 2021, had been issued directing the DGST authorities to unblock the un-utilised input tax credits of the petitioners under Rule 86A of the CGST and DGST Act, 2017, as the one-year period of restriction had lapsed. In view of these developments and assurances, the Court disposed of the writ petitions as satisfied. The Court explicitly stated that the legal issue raised in the present petitions was left open, meaning it was not decided on merits.

Key Issues

1. Whether the restriction on input tax credit under Rule 86A of the CGST and DGST Rules ceases to operate automatically after the expiry of one year, as stipulated in Rule 86A(3)? Petitioner's contention: The petitioners argued that Rule 86A(3) of the CGST and DGST Rules explicitly permits the blocking of input tax credit for a maximum period of one year. Upon the expiry of this one-year period, the restriction automatically lapses and ceases to have any effect. They relied on the plain reading of the said sub-rule. Revenue's contention: The respondents, through their counsel, acknowledged the expiry of the one-year period and took steps to unblock the input tax credit. The DGGI had issued a letter directing the DGST authorities to unblock the credits. The GNCTD counsel assured the court that the unblocking was in progress and would be completed within a specified timeframe.