HC- Blocking of ITC under Rule 86A is valid only to the extent of credit available in electronic credit ledger{ Rawman Metal & Alloys vs. Deputy Commissioner of State Tax [2025] 179 taxmann.com 387 (Bombay)}
Facts:
- Assessee’s electronic credit ledger showed a ‘Nil’ balance at the time the department invoked Rule 86A of the CGST Rules to block ITC.
- Despite there being no ITC available, the officer passed an order blocking credit, effectively restricting utilisation of future credits.
- The assessee contended that Rule 86A permits blocking only of existing ITC, and the department’s action amounted to “negative blocking,” which is not authorised under law.
Issue:
- Whether ITC can be blocked under Rule 86A when no credit balance exists in the electronic credit ledger
Held:
- Rule 86A is a fiscal provision and must be strictly interpreted.
- The rule allows blocking only of ITC actually available in the ledger, not of future or non-existent credit.
- Hence, the blocking of ITC when ledger balance was nil was without jurisdiction and illegal.
- The Court directed that the blocked ITC be restored to the assessee’s credit ledger.
