Delhi High Court: Electronic Credit Ledger cannot be blocked under Rule 86A for non-payment to vendor within 180 days
by ReinHeads Team | Jan 4, 2023
|
Delhi High Court: Electronic Credit Ledger cannot be blocked under Rule 86A for non-payment to vendor within 180 days
- The Petitioner carried on the business of supply of mobiles and mobile parts
- ·The Petitioner’s Electronic Credit Ledger (“ECrL”) was blocked by the department in exercise of the powers conferred under Rule 86A of the CGST Rules, 2017
- The department alleged that Input Tax Credit (“ITC”) was ineligible on account of non-payment of the consideration within the period of 180 days to the supplier in respect of the services procured and thereby the Petitioner was liable to pay interest in terms of Section 16(2)(d) of the CGST Act, 2017
- Being aggrieved by the blockage of ECrL, the Petitioner filed the writ petition challenging the action of the department
|
| Issues before the Court |
- Whether the action of the department in respect of the blockage of ECrL of the Petitioner is in accordance with Rule 86A of the CGST Rules, 2017 in light of the condition for availing ITC envisaged under Section 16(2)(d) of the CGST Act?
|
| Discussion & Ruling |
The Hon’ble Delhi High Court directed to unblock the ITC available to the Petitioner in ECrL based on the following observations:
- Restriction stated under Rule 86A(1) of CGST Rules, can be imposed only where the ITC available in the ECrL has been “fraudulently availed” or is “ineligible”, in as much as specified in the said sub-rule
- Expression “in as much as” is not of a wide import rather it is used in a restrictive sense to qualify the subject
- Use of the expression “in as much as” restricts the scope of availment of ITC on the ground of ineligibility to the extent the conditions set out in sub-clause 1 of Rule 86A of CGST Rules are satisfied
- There is no allegation that the Petitioner has fraudulently availed the ITC lying to the Petitioner’s credit in the ECrL
- The Petitioner’s ECrL cannot be blocked on account of non-payment to vendor within 180 days as per Section 16(2) of the CGST Act
|
*Sunny Jain v Union of India and Others: W.P.(C) 6444/2022, CM Nos.19502/2022 & 33763/2022, Dated 05.12.2022 (Delhi High Court) |
