Muktai Enterprises Vs Sperintendent (Bombay High Court)
Bombay HC Orders Restoration of ₹1.43 Crore ITC Wrongly Blocked Under GST; Partial Relief in ITC Blockage Case: High Court Clarifies Scope of Departmental Powers; GST ITC Blocking Must Follow Lawful Procedure, Rules Bombay High Court; Court Restrains Arbitrary Blocking of Input Tax Credit, Orders Refund to Taxpayer.
Bombay High Court in a recent ruling addressed the issue of Input Tax Credit (ITC) blockage under the GST regime. The petitioner challenged the authorities’ action of blocking ITC worth ₹1.85 crore, comprising ₹41.87 lakh already available at the time of blockage and ₹1.43 crore accumulated thereafter. The Court observed that this matter was identical to those decided earlier in Writ Petition Nos. 10928 and 10933 of 2025, and accordingly adopted the same reasoning. It upheld the department’s decision to block ITC that was already available at the time of action, thereby validating the blocking of ₹41.87 lakh. However, it found no justification for blocking ITC that accrued subsequently, as such credits were earned after the date of the original action and could not legally be frozen without following proper recovery proceedings under the GST Act and Rules. Consequently, the Court directed the authorities to restore ITC worth ₹1.43 crore to the petitioner’s electronic ledger within 15 days from the date of the order. At the same time, it clarified that the department retained the liberty to initiate lawful recovery actions, if warranted, in accordance with statutory procedures. The judgment reinforces the principle that blocking of ITC must be limited to the period and credits specifically justified by law, ensuring that taxpayers’ subsequent entitlements are not arbitrarily restricted.
