ITC Blocking Under Rule 86A Automatically Lapses After One Year { M/s Metal Trade Incorporation v. State Tax Officer 2026 LLBiz HC (Mad) 244 W.P. No.: 35866 of 2023}
Facts:
Petitioner’s ITC was blocked by the department under Rule 86A(1) of the CGST Rules. The restriction continued even after one year from the date of blocking, and the petitioner approached the High Court seeking unblocking of the ITC.
Issue:
Whether the restriction imposed on the utilisation of ITC under Rule 86A(1) can continue beyond one year, or whether it automatically ceases under Rule 86A(3) upon expiry of one year.
Held:
The Madras High Court held that Rule 86A(3) provides a maximum period of one year for the restriction. On expiry of one year from the date of imposition, the restriction automatically ceases to have effect by operation of law. No separate order or action by the taxpayer or department is necessary for the restriction to lapse. Since the petitioner’s ITC had remained blocked beyond one year, the Court directed the authorities to unblock the ITC.
