Vinayak Plylam Marketing vs. Superintendent, Central Goods And Services Tax

Held

The Court noted the submission by the respondent department that the input tax credit of the petitioner had already been unblocked. Consequently, the primary grievance of the petitioner regarding the continued restriction on their ITC was rendered infructuous. The Court stated that it was not necessary to delve into the question of the validity or continued applicability of the restriction imposed on the petitioner's input tax credit. If the unblocking of the tax credit was not yet reflected on the GST portal, the same was to be done forthwith. In light of these developments and the statement made by the respondents, the petitioner did not press their challenge to the vires of Rule 86A. The petition was disposed of based on these observations and the actions taken by the respondents.

Facts

The petitioner, Vinayak Plylam Marketing, challenged the blocking of its input tax credit (ITC) amounting to Rs. 3,43,630/-. This action was taken by the respondent authorities on March 18, 2020, by invoking clause (b) of sub-rule (2) of Rule 86A of the GST Rules, 2017. The petitioner's primary contention, at this stage, was that the restriction on ITC should cease to exist after one year from its imposition, as per sub-rule (3) of Rule 86A. The petitioner also cited decisions from the Karnataka and Bombay High Courts in support of their argument. The respondent department stated that the ITC had already been unblocked, rendering the petitioner's main grievance moot. However, the department clarified that a notice for disallowing a much larger claim of ITC had been issued, which the petitioner would need to address.

Key Issues

1. Whether the restriction on input tax credit imposed under clause (b) of sub-rule (2) of Rule 86A of the GST Rules, 2017, automatically ceases to exist after the expiry of one year from the date of imposition, as stipulated in sub-rule (3) of Rule 86A? Petitioner's Argument: The petitioner argued that the restriction on their input tax credit (ITC) of Rs. 3,43,630/-, imposed on March 18, 2020, under Rule 86A(2)(b), should have expired by operation of law as per Rule 86A(3) after one year. They relied on sub-rule (3) of Rule 86A and decisions from the Karnataka High Court in *Aryan Tradelink Vs. Union of India* and the Bombay High Court in *Advent India PE Advisors Private Limited Vs. The Union of India and Ors.* Revenue's Argument: The respondent department stated that the input tax credit had already been unblocked, thereby resolving the petitioner's immediate grievance regarding the blocked credit. They did not directly address the interpretation of Rule 86A(3) in their response, focusing instead on the fact that the credit was restored.