Srivenkateshwar Tradex Private Limited Through Its Director Rahul Solanki vs. Union Of INDIA & Ors.

Facts

The petitioners, RCI Industries and Technologies Ltd. and Sri Venkateshwar Tradex Private Limited, filed writ petitions before the Delhi High Court challenging 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 the blocking of input tax credit to one year, after which the restriction automatically ceases. The Directorate General of Goods and Services Tax Intelligence (DGGI), Gurgaon Unit, had written a letter dated November 26, 2021, directing the DGST authorities to unblock the input tax credits as the one-year period had lapsed. The counsel for GNCTD stated that the account of one petitioner had been unblocked that day and assured the court that the other petitioner's account would be unblocked within 48 hours.

Held

The Court accepted the statements and undertakings given by the learned counsel for the GNCTD. The respondent was held bound by these assurances. Specifically, the input tax credit account of the petitioner in W.P.(C) 1561/2021 was unblocked on the day of the hearing, and an undertaking was given that the input tax credit account of the petitioner in W.P.(C) 8258/2020 would be unblocked within 48 hours. Consequently, the writ petitions were disposed of as satisfied. The Court explicitly stated that the legal issue raised in the present petitions was left open, meaning no definitive finding or precedent was set on the interpretation of Rule 86A(3) regarding the automatic cessation of restrictions after one year.

Key Issues

1. Whether the restriction on input tax credit under Rule 86A(3) of the CGST and DGST Rules ceases to operate automatically after the expiry of one year, as contended by the petitioners? 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, and upon the expiry of this period, the restriction automatically lapses. They relied on the plain reading of the said sub-rule. The respondents, through their counsel, did not explicitly argue against this interpretation. Instead, the DGGI, Gurgaon Unit, acknowledged the expiry of the one-year period and issued a letter directing the unblocking of the input tax credit. The counsel for GNCTD confirmed the unblocking of one petitioner's account and assured the court regarding the unblocking of the other within 48 hours.