M/S Mili Enterprise vs. Union Of INDIA

Facts

The petitioner, M/s Mili Enterprise, filed a writ application challenging the blocking of its electronic credit ledger under Rule 86A of the Central Goods and Services Tax Rules, 2017. The credit ledger was blocked, preventing the petitioner from utilizing Input Tax Credit (ITC) amounting to Rs. 21,88,860 (Rs. 10,94,430 CGST and Rs. 10,94,430 SGST). The petitioner sought an order to unblock the credit and also challenged the constitutional validity of Rule 86A. The respondents are the Union of India and various GST authorities. The period for which the ledger was blocked has elapsed.

Held

The Court disposed of the writ application by issuing a direction to the concerned authority to permit the writ applicant to operate its electronic credit ledger. The Court reasoned that since the statutory period of one year for blocking the ledger, as provided under Rule 86A, had elapsed, the blocking order had effectively come to an end. While the Court acknowledged the petitioner's challenge to the constitutional validity of Rule 86A, it did not explicitly rule on this issue. The operative direction was to allow the petitioner to access and utilize the ITC in its credit ledger. The Court directed that this exercise be undertaken at the earliest and in accordance with the law. The issue of the validity of Rule 86A was not expressly decided.

Key Issues

1. Whether Rule 86A of the Central Goods and Services Tax Rules, 2017, is ultra vires the Central Goods & Service Tax Act, 2017, as contended by the petitioner? 2. Whether the electronic credit ledger of the petitioner should be unblocked, given that the statutory period for blocking has expired, as contended by the petitioner? Petitioner's Arguments: The petitioner argued that Rule 86A is ultra vires the parent Act and sought the unblocking of its credit ledger. The petitioner also prayed for directions to the respondent authorities to immediately unblock the credit amounting to Rs. 21,88,860, which was illegally and arbitrarily blocked. Revenue's Arguments: The judgment does not record any specific arguments made by the revenue or state authorities regarding the validity of Rule 86A or the unblocking of the credit ledger. The court notes that the period of one year for blocking the ledger has elapsed.