M. M. Traders State of U P (Allahabad High Court)
All the aforequoted writ petitions have been filed aggrieved with blocking of input tax credit by the concerned authority under Rule 86 A of the C.G.S.T. /U.P. G.S.T. Rules, 2017. Rule 86 A(2) of the C.G. & S.T. Rules, 2017, which provides as under :-
“86 A(2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.”
From perusal of Rule 86 A(2) of the C.G. & S.T./U.P. G. & S.T. Rules, 2017, and paragraph 3.4 of the belowquoted guidelines of the Commercial Tax we are of the view that the petitioners should first approach the authorised Officer raising objections against the blocking of the input tax credit and the said authority would be under an obligation to decide the objection within a time bound period.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Praveen Kumar, Sri Aditya Pandey, Sri Pranjal Shukla, learned counsels for the petitioners; Sri B.P. Singh Kachhawah, learned standing counsel & Sri Nimai Das, learned Additional Chief Standing Counsel for the respondents.
2. All the aforequoted writ petitions have been filed aggrieved with blocking of input tax credit by the concerned authority under Rule 86 A of the C.G.S.T. /U.P. G.S.T. Rules, 2017. Rule 86 A(2) of the C.G. & S.T. Rules, 2017, which provides as under :-
“86 A(2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.”
3. The guidelines for disallowing debit of electronic credit ledger under Rule 86 A(2) of the C.G. & S.T. /U.P. G. & S.T. Rules, 2017, has been issued by the Commissioner of Commercial Tax U.P. as under :-
“Office of the Commissioner,
Commercial Tax, Uttar Pradesh
(GST Section)
Letter No.GST/2021-22/ 30 / Commercial Tax
Lucknow: Dated: 23 November, 2021
To
All Zonal Additional Commissioner, Grade-1,
Additional Commissioner, Grade-2 (S.I.B.)
Joint Commissioner, (Executive/ Corporate Circle/ S.I.B.)
Commercial Tax, Uttar Pradesh
Subject: Guidelines for disallowing debit of electronic credit ledger under Rule 86A of the UPGST Rules, 2017 -Reg.
Rule 86A of the Uttar Pradesh Goods and Services Tax Rules, 2017 (hereinafter referred to as “the Rules”) provides that in certain circumstances, Commissioner or an officer authorised by him, on the basis of reasonable belief that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible, may not allow debit of an amount equivalent to such credit in electronic credit ledger.
2. Doubts have been raised by the field formations on various issues pertaining to disallowing debit of input tax credit from electronic credit ledger, under rule 86A of the Rules. Further, Hon’ble High Courts in some cases have emphasized the need for laying down guidelines for the purpose of invoking rule 86A. In view of the above, the following guidelines are hereby issued with respect to exercise of power under rule 86A of the Rules:
3.1 Grounds for disallowing debit of an amount from electronic credit ledger:
3.1.1 Rule 86A of the Rules is reproduced hereunder for reference:
“86A. Conditions of use of amount available in electronic credit ledger.-
(1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as-
a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36-
i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or
ii. without receipt of goods or services or both; or
b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or
c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or
d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reason to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount.
(2) The Commissioner, or the officer authorised by him under sub-rule (l) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.
(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction. “
3.1.2 Perusal of the rule makes it clear that the Commissioner, or an officer authorised by him, not below the rank of Assistant Commissioner, must have “reasons to believe” that credit of input tax available in the electronic credit ledger is either ineligible or has been fraudulently availed by the registered person, before disallowing the debit of amount from electronic credit ledger of the said registered person under rule 86A. The reasons for such belief must be based only on one or more of the following grounds:
(a) The credit is availed by the registered person on the invoices or debit notes issued by a supplier, who is found to be non-existent or is found not to be conducting any business from the place declared in registration.
(b) The credit is availed by the registered person on invoices or debit notes, without actually receiving any goods or services or both.
(c) The credit is availed by the registered person on invoices or debit notes, the tax in respect of which has not been paid to the government.
(d) The registered person claiming the credit is found to be non-existent or is found not to be conducting any business from the place declared in registration.
e) The credit is availed by the registered person without having any invoice or debit note or any other valid document for it.
3.1.3 The Commissioner. or an officer authorised by him, not below the rank of Assistant commissioner, must form an opinion for disallowing debit of an amount from electronic credit ledger in respect of a registered person only after proper application of mind considering all the facts of the case, including the nature of prima facie fraudulently availed or ineligible input tax credit and whether the same is covered under the grounds mentioned in sub-rule (l) of rule 86A as discussed in para 3.1.2 above; the amount of input tax credit involved; and whether disallowing such debit of electronic credit ledger of a person is necessary for restricting him from utilizing/ passing on fraudulently availed or ineligible input tax credit to protect the interests of revenue.
3.1.4 It is reiterated that the power of disallowing debit of amount from electronic credit ledger must not be exercised in a mechanical manner and careful examination of all the facts of the case is important to determine case(s) fit for exercising power under rule 86A. The remedy of disallowing debit of amount from electronic credit ledger being, by its very nature. extraordinary has to be resorted to with utmost circumspection and with maximum care and caution. It contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration of suspicion. The reasons are to be on the basis of material evidence available or gathered in relation to fraudulent availment of input tax credit or ineligible input tax credit availed as per the conditions/grounds under sub-rule (1) of rule 86A.
3.2 Proper authority for the purpose of Rule 86A
3.2.1 The Commissioner is the proper officer for the purpose of exercising powers for disallowing the debit of amount from electronic credit ledger of a registered person under rule 86A. However, Commissioner can also authorize any officer subordinate to him, not below the rank of Assistant Commissioner, to be the proper officer for exercising such power under rule 86A. In exercise of powers conferred by Rule 86A; the officers authorised by the Commissioner on the basis of monetary limits are as mentioned below:
