Negative Blocking of Credit is Permissible Where Assessee’s ECL Had Been Blocked Without Availability of Any Credit | HC

Case Details: Tvl. Skanthaguru Innovations (P.) Ltd. v. Commercial Tax Officer - [2024] 169 taxmann.com 638 (Madras)

Judiciary and Counsel Details

• Krishnan Ramasamy, J.
• Satish Parasaran, Sr. counsel & Karthik Sundaram for the Petitioner.
• C. Harsha Raj, Addl. Govt. Pleader & R.P. Pragadish, Sr. Standing counsel for the Respondent.

Facts of the Case

In the present case, the petitioner challenged the blocking of their Input Tax Credit (ITC) under Rule 86A, arguing that since their Electronic Credit Ledger (ECL) had a Nil balance and the ITC had already been used, the blocking was unjustified. It was also contended that the State Authorities lacked jurisdiction, as the Central Authorities were already investigating the matter.

High Court Held

The High Court noted that Rule 86A permits blocking of ITC even if it is no longer available in the ECL or has already been used, as long as it was fraudulently claimed since the word “available” shall be interpreted in such a way that ITC has to be available in ECL, at any point of time, for purpose of debiting ECL. It further clarified that both Central and State Authorities have separate jurisdictions and can act independently in investigating fraudulent claims. The Court also upheld the blocking orders and confirmed that the authorities could continue investigating the larger fraud claim.

List of Cases Reviewed

• Samay Alloys India Pvt. Ltd. v. State of Gujarat, 2022 (61) GSTL 421 (Guj.)
• Best Crop Science Pvt. Ltd. v. Principal Commissioner, CGST (2024) 22 Centax 531 (Del.), distinguished.

List of Cases Referred to

• Samay Alloys India (P.) Ltd. v. State of Gujarat [2022] 135 taxmann.com 243/91 GST 338/61 GSTL 421 (Gujarat) (para 2.7).