HC Orders ITC Unblocking After 10% Tax Deposit in Appeal

Case Details: Arise Steels (P.) Ltd. vs. Assistant Commissioner (ST) - [2025] 176 taxmann.com 589 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• Ms. N.V. Lakshmi for the Petitioner.
• R.Suresh Kumar, Additional Government Pleader for the Respondent.

The Petitioner’s Electronic Credit Ledger (ECL) was blocked under Rule 86A of the CGST Rules following the issuance of an assessment order. Pursuant to the said order, the Petitioner filed an appeal under Section 107 of the CGST Act and deposited 10 per cent of the disputed tax amount in accordance with the statutory requirement. The Petitioner thereafter sought unblocking of the ECL, which was resisted by the revenue on the ground that restrictions under Rule 86A(3) remain operative for a period of one year irrespective of any appellate remedy availed. The Petitioner relied upon the decision in Tvl. New Royal Traders v. Assistant Commissioner [2023] 154 taxmann.com 558 (Madras) , wherein it was held that upon filing of appeal with the prescribed pre-deposit, restrictions under Rule 86A(3) cease to apply. The matter was accordingly placed before the Madras High Court.

HC Held

The Madras High Court held that once the statutory appeal has been filed and 10 per cent of the disputed tax has been deposited, the restrictions imposed under Rule 86A(3) cannot continue. The Court followed the ratio laid down in Tvl. New Royal Traders and directed the revenue to unblock the ECL forthwith

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