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UNBLOCK ECL
Court Directs GST Dept to Unblock Electronic Credit Ledger and Refund Excess Payment Made by Assessee
Court Directs GST Dept to Unblock Electronic Credit Ledger and Refund Excess Payment Made by Assessee
The High Court has ruled in favor of an Assessee, directing the GST department to withdraw the negative block of the electronic credit ledger at the earliest. The court held that the condition precedent for the exercise of power under Rule 86A of the GST Rules is the availability of credit in the electronic credit ledger, which is alleged to be ineligible. The court emphasized that the power should not be used as a tool to harass the Assessee and that the Government needs to apply its mind for the purpose of laying down some guidelines or procedure for invoking Rule 86A of the Rules. The Assessee was entitled to the refund of Rs. 20 Lakh deposited by them to enable them to file their return. The respondents were directed to refund this amount to the Assessee within a period of two weeks from the date of the receipt of the writ of this order.
Case Name:
MILAP SCRAP TRADERS THROUGH PRO. HARSHADBHAI MANUBHAI PATEL vs. STATE/COMMERCIAL TAX OFFICER
HIGH COURT OF GAUHATI
R/Special Civil Application No. 12986 of 2021
Issue:
The central legal question in this case is whether department can block Assessee's Electronic Credit Ledger if ECL has NIL Balance?
Facts:
The Assessee filed a writ petition seeking to unblock the Input Tax Credit (ITC) amounting to Rs. 7,68,554/- of CGST and Rs. 7,68,549/- of SGST in the petitioner’s Electronic Credit Ledger, which reflected a balance to a negative figure of Rs. 14,11,678/-.
The Assessee’s grievances were not replied to, and no show cause notice had been issued.
The Assessee sought relief through a Writ of Mandamus or any other Writ, order, or direction in the nature of Mandamus directing the respondent to unblock the Input Tax Credit, allowing the petitioner to raise E-way bills, and filing GSTR-3B for the period April, 2021-22 and subsequent returns without payment of negative ITC due to blocking of ITC by the respondents.
Arguments:
The main argument from the Assessee’s side was that Rule 86A of the CGST Rules could not be invoked in the absence of any credit balance in the electronic credit ledger. The Assessee was forced to pay an excess amount of approximately Rs. 20 Lakh as a result of illegal negative blocking of the electronic credit ledger.
The Assessee argued that the authorities were not remediless with respect to the alleged wrongful availment of the input tax credit, and the admissibility of input tax credit could be verified through issuance of show-cause notice and adjudication of the liability.
Key Legal Precedents:
The court referred to Rule 86A of the CGST Rules, which empowers the Commissioner or an officer authorized by him to disallow debit from the electronic credit ledger for an amount equivalent to the amount claimed to have been fraudulently availed or is ineligible.
The court also cited Circulars and guidelines issued by the Central Board of Indirect Taxes & Customs and the Office of the Commissioner of State Tax, State Goods & Services Tax Department, Kerala, which provided detailed procedures and conditions for disallowing the debit of the electronic credit ledger under Rule 86-A of the CGST Rules.
Judgement:
The court ruled in favor of the Assessee, directing the respondents to withdraw the negative block of the electronic credit ledger at the earliest.
The court held that the condition precedent for the exercise of power under Rule 86A of the GST Rules is the availability of credit in the electronic credit ledger, which is alleged to be ineligible.
The court also ruled that the Assessee was entitled to the refund of Rs. 20 Lakh deposited by them to enable them to file their return.
The respondents were directed to refund this amount to the Assessee within a period of two weeks from the date of the receipt of the writ of this order.
In conclusion,
the court’s decision was in favor of the Assessee, holding that the power under Rule 86A of the GST Rules should be used sparingly and only on subjective weighty grounds and reasons. The court emphasized that the power should not be used as a tool to harass the Assessee and that the Government needs to apply its mind for the purpose of laying down some guidelines or procedure for invoking Rule 86A of the Rules.
FAQ:
Q1: What was the main argument from the Assessee’s side?
A1: The main argument from the Assessee’s side was that Rule 86A of the CGST Rules could not be invoked in the absence of any credit balance in the electronic credit ledger. The Assessee was forced to pay an excess amount of approximately Rs. 20 Lakh as a result of illegal negative blocking of the electronic credit ledger.
Q2: What was the court’s ruling?
A2: The court ruled in favor of the Assessee, directing the respondents to withdraw the negative block of the electronic credit ledger at the earliest. The court held that the condition precedent for the exercise of power under Rule 86A of the GST Rules is the availability of credit in the electronic credit ledger, which is alleged to be ineligible. The court also ruled that the Assessee was entitled to the refund of Rs. 20 Lakh deposited by them to enable them to file their return. The respondents were directed to refund this amount to the Assessee within a period of two weeks from the date of the receipt of the writ of this order.
Q3: What was the court's emphasis on the use of power under Rule 86A of the GST Rules?
A3: The court emphasized that the power under Rule 86A of the GST Rules should be used sparingly and only on subjective weighty grounds and reasons. The court emphasized that the power should not be used as a tool to harass the Assessee.
