Arise Steels Private Limited Vs Assistant Commissioner (ST) (Madras High Court)
In a recent order, the Madras High Court has ruled that a taxpayer’s blocked Input Tax Credit (ITC) must be unblocked if they have filed an appeal against an assessment order by depositing 10% of the disputed tax amount. The ruling came in a writ petition filed by Arise Steels Private Limited, which challenged the blocking of its electronic credit ledger.
The company’s ITC, totaling over Rs. 3.2 crore, was blocked by the tax authorities under Rule 86A of the CGST Rules, 2017. The blocking was initiated through communications dated May 22, 2025, and November 27, 2024. The company had since received an assessment order for the periods 2022-2023 and 2023-2024 and had filed an appeal under Section 107 of the GST enactments on May 12, 2025.
The tax authorities argued that the restrictions under Rule 86A should remain in force for a period of one year, as stipulated by Rule 86A(3). However, the High Court, citing its own previous judgment in the case of New Royal Traders Vs Assistant Commissioner, took a different view.
The court noted that in the New Royal Traders case, it was established that if a taxpayer files an appeal and deposits 10% of the disputed tax, the restrictions under Rule 86A cease to apply. The court’s previous order had given the taxpayer the liberty to deposit 10% of the confirmed amount, stating that upon such deposit, the blocked credit would be unblocked.
