Samagrah Metal Trading Co. Vs Commissioner State Goods And Service Tax and 3 Others (Allahabad High Court)
In a significant ruling for businesses operating under the Goods and Services Tax (GST) regime, the Allahabad High Court has upheld the practice of ‘negative blocking’ of Input Tax Credit (ITC) under Rule 86A of the Central Goods and Services Tax (CGST) / Uttar Pradesh Goods and Services Tax (UPGST) Rules, 2017. The decision, in the case of Samagrah Metal Trading Co. Vs Commissioner State Goods And Service Tax And 3 Others, clarifies the nature and scope of Rule 86A, dismissing the petitioner’s challenge to such blocking.
Samagrah Metal Trading Co. had approached the High Court seeking a mandamus to unlock its electronic credit ledger, which had been debited by Rs. (-) 1,23,59,000/-, thereby reflecting a negative balance. The petitioner contended that such negative blocking of credit was illegal and sought 18% interest for the alleged unlawful action. The respondents, including the Commissioner State Goods and Service Tax, supported the impugned blocking order.
The Central Legal Question: Scope of Rule 86A
The core controversy before the High Court was whether Rule 86A of the CGST/UPGST Rules, 2017, permits the blocking of ITC to the extent that it results in a negative balance in the electronic credit ledger. The petitioner argued that this went beyond the legislative intent of the Rule.
