Credit Cannot Be Blocked In Electronic Credit Ledger If Sufficient Balance Not Available: Gujarat High Court
Mehak Dhiman
16 Oct 2024 8:58 PM IST
The Gujarat High Court stated that there cannot be any blocking of the credit in electronic credit ledger if there is no sufficient balance available. The Division Bench, comprising Justices Bhargav D. Karia and Niral R. Mehta, was hearing a case where the assessee contested the blocking of Input Tax Credit (ITC) amounting to ₹2,44,05,567 in its electronic credit ledger....
The Gujarat High Court stated that there cannot be any blocking of the credit in electronic credit ledger if there is no sufficient balance available.
The Division Bench, comprising Justices Bhargav D. Karia and Niral R. Mehta, was hearing a case where the assessee contested the blocking of Input Tax Credit (ITC) amounting to ₹2,44,05,567 in its electronic credit ledger.
Rule 86A of CGST Rules, 2017 empowers the Commissioner or authorized officer to restrict debit of fraudulently availed or ineligible Input Tax Credit (ITC) from the electronic credit ledger for discharge of liabilities or refund claims, subject to recording reasons in writing.
The assessee/petitioner availed Input Tax Credit (ITC) under the Central/Gujarat State Goods and Services Tax Act, 2017. The assessee's ITC, amounting to Rs. 2,44,05,567/-, was blocked by the Assistant Commissioner, CGST Una. As a result of this blocking, the assessee's GST credit ledger reflected a negative balance.
The assessee submitted that the department has failed to consider that the balance in the Electronic Credit Ledger of the assessee was Nil when blocking of Rs. 2,44,05,567/- was imposed and therefore, if no input tax credit was available in the ledger, the blocking of Electronic Credit Ledger under Rule 86A of the GST Rules and insertion of negative balance in the ledger would be wholly without jurisdiction and illegal.
The bench referred to the case of Samay Alloys India Pvt. Ltd. v. State of Gujarat [(2022) 91 GST338 (Gujarat)] where Gujarat High Court held that “……….it is not in dispute that the amount of input tax credit available in the electronic credit ledger as on the date of blocking of ledger was Nil. If no input tax credit was available in the ledger, the blocking of electronic credit ledger under Rule 86-A of the Rules and insertion of negative balance in the ledger would be wholly without jurisdiction and illegal………...”
The bench, in the above case after referring to Circular No.4 of 2021 dated 24.05.2021 issued by the Office of the Commissioner of State Tax, State Goods & Services Tax Department, Kerala with regard to blocking of the credit, observed if there is Nil or insufficient balance in a particular tax head in the Electronic Credit Ledger, then the balance in another tax head can be blocked only if the cross-utilization from such head is permissible in law.
But such cross-utilization between CGST and SGST is not permissible and therefore, the SGST credit ledger cannot be blocked if sufficient credit balance is not available under the CGST head and vice versa, the bench noted in the case of Samay Alloys India Pvt. Ltd. v. State of Gujarat.
The bench concluded that there cannot be any blocking of the credit in Electronic Credit Ledger if there is no sufficient balance available.
In view of the above, the bench allowed the petition and directed the department to withdraw the negative block of the Electronic Credit Ledger.
Counsel for Petitioner/ Assessee: Priyank P Lodha
Counsel for Respondent/ Department: Siddharth H Dave
Case Title: PMW Metal and Alloys Pvt. Ltd. v. Union Of India & Ors.
LL Citation: 2024 LiveLaw (Guj) 157
Case Number: R/SPECIAL CIVIL APPLICATION NO. 5541 of 2024
