ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

1. By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs;

“(A) This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith withdraw the negative block of the electronic credit ledger of the Petitioners as visible from the extract of credit ledger annexed at Annexure-A;

(B) Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to direct the Respondents to forthwith withdraw the negative block of the electronic credit ledger of the Petitioners as visible from the extract of credit ledger annexed at Annexure-A;

(C ) Ex parte ad interim relief in terms of prayer-B may kindly be granted;

(D) Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.”

2. The facts, giving rise to this litigation, may be summarized as under;

2.1 The writ applicant No.1 is a private limited company. The writ applicant No.2 is one of the Directors and share holder of the writ applicant No.1-Company. The Company is engaged in the business of manufacture and sale of MS Billets. It is not in dispute that the Company is registered under the GST Act.

2.2 It appears from the materials on record that at the relevant point of time when the writ applicants attempted to file their return for the month of September, 2021, there was no credit balance in the electronic credit ledger. Despite the same, the portal displayed a message that the electronic credit ledger had been blocked by the respondent No.2. It was further noticed by the writ applicants that a negative balance had been entered in their electronic ledger by the respondent No.2. In such circumstances and as a result of such negative balance, if the writ applicants would file return for the month of September, 2021 by claiming input tax credit, the writ applicants would be required to pay an additional amount of output tax under the provisions of the GST Act to the extent of negative balance of the input tax credit in the electronic credit ledger.

2.3 It appears that the writ applicants addressed a letter dated 22nd October, 2021 to the respondent No.2, requesting for reasons to block the input tax credit. The respondent No.2, however, thought fit not to pay any heed to such request.

2.4 In such circumstances, referred to above, the writ applicants are here before this Court with the present application.

3. Mr. Uchit Sheth, the learned counsel appearing for the writ applicants vehemently submitted that his clients were unable to file the return for the month of September, 2021 because of the negative block in the ledger. He would submit that his clients would immediately be liable to additional amount of tax equivalent to the negative block even without any adjudication if they would proceed to file such return.

4. He submitted that the negative block of electronic credit ledger with Nil balance in the credit ledger as on the date of the imposition of the block is wholly without jurisdiction and beyond the scope of Rule 86-A of the GST Rules.

5. Mr. Sheth would submit that the sine-qua-non for the exercise of power under Rule 86A of the GST Rules is that there should be credit available in the electronic credit ledger which is alleged to be ineligible. In other words, the submission of Mr. Sheth is that if any credit balance is available, then the authority may, for reasons to be recorded in writing, not allow the debit of amount equivalent to such credit. However, there is no power of negative blocking for the credit to be availed in future.

6. In such circumstances, referred to above, Mr. Sheth prays that there being merit in his writ application, the same be allowed and the respondent No.2 may be d