"NEGATIVE BLOCKING OF ITC LEDGET"

"NEGATIVE BLOCKING OF ITC LEDGET"

Rule 86A grants power to the Proper Officer (Authorised by the Commissioner, not below the rank of Assistant Commissioner) to block Electronic Credit Ledger (ECrL) when they have reasons to believe that ITC has been availed fraudulently.

But in my humble opinion, such power to block ITC is restricted to the amount available in the ECrL at the time of blocking.

Even the heading of the Rule 86A is "Conditions of use of amount available in Electronic Credit Ledger"

This title in itself suggest that amount available.

1. Samay Alloys India Pvt. Ltd. - Gujarat High Court

(2022) 61 GSTL 421

Negative blocking of electronic credit ledger with Nil balance and insertion of negative balance in ledger would be wholly without jurisdiction and was against intent of Rule 86A of CGST Rules, 2017.

2. Milap Scrap Traders - Gujarat High Court

(2022) taxo online 312

Negative Blocking Not Allowed When There Is No Credit Balance In Electronic Credit Ledger.

3. S.S. Enterprise - Calcutta High Court

(2022) 64 GSTL 311

Input tax credit which was not availed on date of blocking of electronic credit ledger cannot be blocked till passing of final order.

4. Laxmi Fine Chem - Telangana High Court

2024-VIL-311-TEL

There is no power conferred upon the authorities for block of the credit to be availed by the petitioner in future. The rules does not provide for insertion of negative balance in the ledger.

Conclusion:

Blocking of ITC Ledger has civil consequences, hence it must be exercised fairly and reasonably by following principles of natural justice which presuppose the grant of prior hearing.

Power to Block ECrL is on nature of an administrative power with quasi-judicial hues exhibited in twin pre-requisites viz. satisfaction of Commissioner and recording of reasons in writing.

Hope you would find this useful.

Thanks

Abhishek Raja Ram

9810638155