DDS Jewels Private Limited Vs State of Maharashtra And Others (Bombay High Court)
The dispute before the Bombay High Court centered on the power of the State tax authorities to restrict the use of a taxpayer’s Input Tax Credit (ITC) available in the Electronic Credit Ledger (ECL) under Rule 86-A of the Central/Maharashtra Goods and Services Tax (CGST/MGST) Rules, 2017.
DDS Jewels Private Limited (the Petitioner) challenged two orders dated July 2, 2025, which imposed restrictions on the use of their ITC, alleging that it was fraudulently availed. The core legal challenge was not against the authority to impose restrictions under Rule 86-A, but against the manner in which this power was exercised, specifically alleging a gross violation of the principles of natural justice and fairness.
Factual Background and Departmental Action
Prior to issuing the restrictive orders, the department had issued notices to the Petitioner dated June 30, 2025. Although the department’s counsel, Ms. Vyas, initially argued that these were merely intimations regarding the proposal to exercise powers under Rule 86-A, the text of the notices clearly instructed the Petitioner to “show-cause and explain their reason for fraudulent availed ITC.” Crucially, the notices set a deadline for the Petitioner to file its reply: on or before July 3, 2025.
