The court ruled that the authority to block Input Tax Credit under Rule 86-A only applies when the credit is actually available in the Electronic Credit Ledger, not when the ledger shows a Nil balance.

JUDGMENT :

M.S. SONAK, J.

1. Heard learned Counsel for the parties.

2. Rule. The Rule is made returnable immediately at the request of and with the consent of the learned Counsel for the parties.

3. The Petitioner challenges the impugned order dated 9 December 2024 made by the Respondent purporting to invoke the provisions of Rule 86-A of the Central Goods and Services Tax Rules, 2017 (CGST Rules) to block the use of Input Tax Credit (ITC) in the Petitioner’s Electronic Credit Ledger to the extent of Rs. 12,84,273/-.

4. Admittedly, at the time when the impugned order dated 9 December 2024 was made, the ITC available in the Petitioner’s Electronic Credit Ledger was “Nil”. Therefore, Mr Parmeet Singh, the learned Counsel for the Petitioner, urged that the Respondent was not entitled to invoke the provisions of Rule 86-A and such invocation was ultra vires. He relied on the decision Gujarat High Court in the case of Samay Alloys India Pvt. Ltd. Vs. State of Gujarat, Special Civil Application No. 18059 of 2021 decided on 03.02.2022 the decision of the Telangana High Court in the case of Laxmi Fine Chem Vs. Assistant Commissioner, Writ Petition No. 5256 of 2024 decided on 18.03.2024 and the decisions of the Delhi High Court in the cases of Best Crop Science Pvt. Ltd. through Authorised Representative Vs. Principal Commissioner, CGST Commissionerate, Meerut & Ors. Writ Petition (c) No. 10980/2024 decided on 24.09.2024 and Karuna Rajendra Ringshia Proprietor R.R. Enterprises Vs. Commissioner of Central Goods and Service Tax & Ors., Writ Petition (c) No. 7250/2024 decided on 21.10.2024 to support his contention.

5. Ms Chavan, the learned Additional Government Pleader, submitted that on a proper reading and construction of Rule 86-A, it was apparent that the blocking could not be restricted only to the amount available in the Electronic Credit Ledger as on the date of the order, but that the blocking would relate to the entire ITC fraudulently availed. She submitted that any other interpretation would virtually render Rule 86-A otiose. She submitted that the parties, who fraudulently availed of ITC, would then immediately utilise and exhaust the same, rendering it virtually impossible to exercise the powers conferred by Rule 86-A. She submitted that the legislative or executive intent behind enacting Rule 86-A was to block the utilisation of ITC that may have been fraudulently obtained. Such an intention cannot be frustrated by a narrow construction adopted by the Gujarat High Court and the Delhi High Court.

6. Instead, Ms Chavan relied on the decision of the Calcutta High Court in the case of Basanta Kumar Shaw Vs. Assistant Commissioner of Revenue, Commercial Taxes and State Tax, Tamluk Charge and Others, (2023) 120 GSTR 864 (Cal), which according to her has correctly interpreted Rule 86-A and held that the blocking can relate also to the ITC that would be available in the Electronic Credit Ledger to the extent of the ITC fraudulently availed. She submitted that the decision of the Calcutta High Court gives proper meaning to the letter and the legislative intent, and therefore, it must be preferred over the decisions of the Gujarat High Court and the Delhi High Court.

7. The rival contentions now fall for our determination.

8. The entire argument on either s