Rinku Gyanchand Bhansali Prop. Of Laxmi Traders vs. State Of Gujarat

Facts

The petitioner, Rinku Gyanchand Bhansali, proprietor of Laxmi Traders, filed a Special Civil Application before the Gujarat High Court challenging the blocking of input tax credit (ITC) amounting to Rs. 6,01,859/- in their electronic credit ledger. The blocking orders were issued by the respondent, the State of Gujarat, on January 20, 2020, and January 21, 2021, purportedly under Rule 86A of the GST Rules, 2017. The petitioner contended that the period for which the ITC could be blocked had already elapsed, rendering the order ineffective.

Held

The Court held that any order blocking input tax credit in the electronic credit ledger can remain in force for a maximum period of one year. Since the orders in question, dated January 20, 2020, and January 21, 2021, had already elapsed their one-year validity period, they could not be considered operative as of the date of the judgment. Consequently, the Authority was directed to take necessary steps to permit the writ applicant to utilize their input tax credit in the electronic credit ledger. The Court did not explicitly leave any issues undecided. The ratio decidendi is that the time limitation prescribed under Rule 86A for blocking ITC must be strictly adhered to, and expired orders cease to have effect.

Key Issues

1. Whether an order blocking input tax credit under Rule 86A of the CGST Rules, 2017, which has remained in force for more than one year, can continue to be operative? (Question of law) The petitioner argued that Rule 86A of the CGST Rules, 2017, stipulates a maximum period of one year for which input tax credit can be blocked. Since the orders dated January 20, 2020, and January 21, 2021, had already exceeded this one-year period, the blocking of ITC was no longer valid. The petitioner sought the unblocking of their electronic credit ledger to utilize the ITC. The revenue, represented by the State of Gujarat, did not record any specific arguments in the judgment regarding the validity of the prolonged blocking of ITC.