• Notification Date: 13-12-2021
  • Notification No: 83/2021-22

GST Authority directed by Bombay HC to Unblock ITC of Rs. 1.17cr availed in its Electronic Credit Ledger after one year of restriction

The Bombay High Court directed the GST Authority to unblock ITC of Rs. 1.17 Crores availed in its electronic credit ledger after one year of restriction. Mr. Prakash Shah advocate for the petitioner, Advent India PE Advisors Private Limited refers to the provisions of rule 86A of the Central Goods and Services Tax Rules, 2017 and in particular sub-rule (3) thereof, which provides that restriction imposed under sub-rule (1) would cease to have effect after expiry of one year from the date of imposition thereof. Drawing our attention to Exhibit A, he contends that the input tax credit was blocked on January 26, 2020 and since more than 20 months have lapsed by now, by operation of law, the petitioner is entitled to relief claimed in this writ petition.

Ms. Sangeeta Yadav for the respondents has placed before us the written instructions received by her from the respondent, the Deputy Commissioner wherein it was stated that This Department has consistently asked the taxpayer for submissions required for due verification of the Credit availed.

However, the first submission which was incomplete, was received from the taxpayer on 17.03.2020. The Department was in communication with the taxpayer seeking reconciliation statements for the difference in their GST returns namely GSTR-2A and GSTR-3B from FY 2017-18 to 2020-21. The last letter from the department addressed to taxpayer was sent on 31.05.2021 asking for reconciliation between ITC stated in monthly returns and annual returns.

However, the reply from the taxpayer is still awaited. Instead of furnishing the documents the taxpayer has filed a writ petition. Due process for verification and unblocking is being followed by this office on priority basis and after completion of the due verification, if any mismatch in the Credit availment is noticed a Show Cause Notice (SCN) will be issued to the taxpayer and the Input Tax Credit will be unblocked immediately.

It was the submission of Ms. Yadav that said that after the process of verification is complete, the input tax credit would be unblocked. The division bench headed by the Chief Justice Deepankar Dutta and Justice M.S.Karnik noted that having regard to the statutory mandate in sub-rule (3) of rule 86A, the petitioner is entitled to claim that the input tax credit ought to have been unblocked immediately after one year of the restriction being imposed under sub-rule (1) thereof.

 If indeed the respondents were of the view that the petitioner had not been cooperating with the department, they ought to have proceeded against it in a manner known to law. However, to say that reply is awaited and hence lifting of the restriction has not been resorted to is clearly illegal.