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IN THE HIGH COURT OF DELHI
Manmohan, Navin Chawla, JJ.
Wipro Ltd. - Appellant
Versus
Assistant Commissioner of GST MCIE Division CGST - Respondent
W.P.(C) 14422 of 2021
Decided On : 16-12-2021
| Table of Content |
|---|
| 1. challenging legality of rule 86a (Para 1) |
| 2. violation of natural justice in itc blocking (Para 2 , 3) |
| 3. acknowledgment and acceptance of notice (Para 4) |
| 4. direction for issuance of a reasoned order (Para 5) |
JUDGMENT
Manmohan, J. (Oral):
C.M.No.45404/2021
Exemption allowed, subject to all just exceptions.
Accordingly, the application stands disposed of.
W.P.(C) No.14422/2021
1. Present writ petition has been filed challenging Rule 86A of the CGST Rules as illegal, arbitrary and bad in law. Petitioner also seeks a direction declaring the continuance of blocking of petitioner's ITC of INR 8,72,22,741/-beyond a period of one year as illegal on account of violation of express mandate of Rule 86A(3) and to unblock and restore the credit of the petitioner.
2. Learned counsel for the petitioner states that the respondent had not given any reason to the petitioner justifying the blocking of credit and, thus, the impugned action is in violation of the principles of natural justice. He states that Rule 86A(3) of the CGST Rules, 2017 mandates that any restriction on the usage of ITC shall cease to have effect after the expiry of a period of one year from the date of imposing of such restriction. However he points out that in the present case, despite the period of one year having lapsed on 25th January, 2021, the respondent has not unblocked the ITC.
3. Learned Counsel for the petitioner states that despite the letters written by the petitioner on 15th June 2021 and 17th September, 2021 to the respondent, the respondent has neither provided a response justifying the blocking of ITC nor has unblocked the ITC.
4. Issue notice. Mr.Abhinav Kalia, Advocate accepts notice on behalf of the respondent. He states that he has no instructions in the present case.
5. However, keeping in view the fact that the petitioner's representations/letters dated 15th June 2021 and 17th September, 2021 have not been decided till date, the present writ petition is disposed of with a direction to the respondent to decide the aforesaid representations/letters by way of a reasoned order in accordance with law within four weeks. The rights and contentions of all the parties are left open.
The court emphasized the importance of providing a reasoned order justifying the blocking of input tax credit in accordance with Rule 86A(3) and the principles of natural justice.
The court emphasized the requirement of 'reasons to believe' and independent application of mind for exercising power under Rule 86A of the CGST Rules.
Blocking of Input Tax Credit without notice or fraud allegations is impermissible; taxpayers may initially avail ITC without supplier payment but must reverse if unpaid after 180 days.
The main legal point established in the judgment is that the blocking of Input Tax Credit (ITC) under Rule 86A of the CGST Rules must be based on tangible material and reasons to believe that the con....
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 balanc....
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