Karuna Rajendra Ringshia Vs Commissioner of Central Goods And Service Tax & Ors. (Delhi High Court)
In the case of Karuna Rajendra Ringshia Vs Commissioner of Central Goods And Service Tax & Ors., the Delhi High Court addressed the issue of “negative blocking” of the petitioner’s Electronic Credit Ledger (ECL) under Rule 86A of the CGST Rules, 2017. The petitioner contended that the blocking of ₹43,76,492, resulting in a negative balance of ₹36,18,911 in the ECL, was unjustified and beyond the legal scope. Relying on the precedent set in Best Crop Science (P) Ltd. Vs Commissioner, the Court observed that Rule 86A serves as an emergent measure for revenue protection, allowing temporary blocking of Input Tax Credit (ITC) in cases of suspected fraud or ineligibility. However, the rule does not permit actions equivalent to a recovery order or demand replenishment of ITC.
The Court clarified that any proceedings to establish misuse of ITC must follow the due process under Sections 73 or 74 of the CGST Act. Additionally, Rule 86A is operative only for a year unless earlier revoked. The High Court found the negative blocking in this case unsustainable and directed the tax authorities to lift it immediately. This judgment reinforces the limited scope of Rule 86A and ensures taxpayers are not subjected to undue financial burdens without proper adjudication.
