M/S Vimal Petrothin Private Limited vs. Commissioner CGST Commissionerate Central Goods And Service Tax Dehradun

Held

The Court held that the respondents' counsel conceded that the petitioner's electronic credit ledger could not be blocked for a period exceeding one year, as per the express provision of Sub-Rule (3) of Rule 86(A) of the C.G.S.T. Rules. The Court found the petitioner's contention to be correct, stating that the continuance of the blockage of the petitioner's input credit ledger after January 14, 2021, was not supported by law. Consequently, the writ petition was allowed. The Court directed Respondent No. 1 to forthwith unblock the input tax credit availed by the petitioner in its electronic credit ledger. However, the Court clarified that this order would not preclude the respondents from taking such action against the petitioner as is permissible under law.

Facts

M/s Vimal Petrothin Private Limited, a manufacturing company, had its input tax credit (ITC) provisionally blocked on January 15, 2020, under Rule 86(A)(1) of the C.G.S.T. Rules, 2017. The blockage, amounting to ₹1.5 crores, was based on allegations of availing ITC on fake invoices from non-existent firms. The petitioner sought a writ of mandamus directing the Commissioner, CGST, to unblock ITC amounting to ₹71,61,296/-. The petitioner argued that the restriction on the electronic credit ledger could not exceed one year from the date of imposition, as stipulated in Rule 86(A)(3). The respondents initially sought time to obtain instructions.

Key Issues

1. Whether the provisional blocking of input tax credit under Rule 86(A)(1) of the CGST Rules, 2017, can continue beyond a period of one year from the date of imposition, as per Rule 86(A)(3)? Petitioner's Contention: The petitioner argued that Rule 86(A)(3) of the CGST Rules, 2017, prescribes an outer limit of one year for the restriction on the electronic credit ledger, commencing from the date of imposition. Since the blockage was imposed on January 15, 2020, the one-year period expired on January 14, 2021. Therefore, the continued blockage of their ITC after this date is not supported by law. They relied on Rule 86(A)(2) and (3). Respondents' Contention: The respondents, through their counsel, conceded that the blockage of the petitioner's input tax credit ledger could not continue beyond one year, in view of the express provision in Sub-Rule (3) of Rule 86(A) of the CGST Rules.