Hemang Bipin Varaiya Vs State of Maharashtra & Ors. (Bombay High Court)
Summary: The Bombay High Court held that Rule 86A of the CGST/MGST Rules does not permit “negative blocking” of Input Tax Credit (ITC) where no sufficient balance exists in the Electronic Credit Ledger (ECL). The petitioner challenged the blocking of ITC amounting to Rs. 4.82 crore on the ground that the department created a negative balance despite inadequate credit being available in the ledger. The Court observed that Rule 86A of CGST Rules 2017 can be invoked only to the extent of credit actually available in the ECL at the time of blocking and cannot extend to future credits. Relying on decisions of the Gujarat, Delhi, and Telangana High Courts, the Court reiterated that taxing statutes must be strictly interpreted and legislative intent cannot override clear statutory language. Consequently, the Court quashed the blocking of Rs. 4.38 crore while permitting the department to block Rs. 43.19 lakh that was available in the ECL pending adjudication proceedings.
Facts:
Hemang Bipin Varaiya (“the Petitioner”), proprietor of M/s. Mahavir Metal Industries, engaged in manufacture and trade of copper, brass utensils and non-ferrous metals, holding GST registration.
The State of Maharashtra & Ors. (“the Respondent”), who issued a show cause notice dated April 22, 2025 and passed an order dated June 19, 2025 under Rule 86A blocking ITC of Rs. 4.82 crores.
