Dhairya Trade Link Vs Deputy Commissioner of State Tax And Ors. (Bombay High Court)
In a recent matter before the Hon’ble Bombay High Court, a significant ruling was delivered on the issue of negative blocking of Input Tax Credit (ITC) under Rule 86A of the CGST Rules. The petitioner, represented by Advocate Sachin Kumar, challenged the action of the tax authorities who had blocked ITC in excess of the balance available in the taxpayer’s electronic credit ledger.
The core question before the Court was whether the department is empowered to block ITC beyond the amount actually available—commonly referred to as “negative blocking.” The petitioner argued that such action is not permissible under Rule 86A and relied heavily on earlier decisions of the High Court.
Advocate Kumar submitted that the controversy stood fully covered by landmark judgments in Rawman Metal & Alloys vs. Deputy Commissioner of State Tax, Thane and Muktai Enterprises vs. Superintendent of CGST, Pune. In these cases, the High Court had categorically held that negative blocking of ITC is not allowed under the statutory framework.
Accepting these submissions, the Hon’ble Bombay High Court disposed of the petition, reaffirming its earlier position. Relying on the rulings in Rawman Metal & Alloys and Kings Securities, the Court concluded that blocking of ITC in excess of the balance available in the electronic credit ledger is unsustainable in law.
