ITC cannot be blocked beyond 10% of tax demand at interim stage: P&H HC

S S Con Cast Private Limited Vs Union of India And Ors (Punjab and Haryana High Court)

The Hon’ble Punjab and Haryana High Court in S S Con Cast Private Limited vs Union of India and Others [CM-18640-CWP-2024 in/and CWP-19104-2024 (O&M) and CWP-19806-2024, order dated November 18, 2024] held that input tax credit ledger cannot be negatively blocked beyond 10% of the tentative tax demand at the interim stage, as held in precedents.

Facts:

S S Con Cast Private Limited (“the Petitioner”) challenged the negative blocking of its input tax credit ledger under Rule 86A of the CGST Rules, 2017. It contended that such negative balance was impermissible and invited the Court’s attention to various High Court rulings, including K.J. International v. State of Punjab [CWP-22514-2023 Judgment dated October 6, 2023], where the Punjab & Haryana High Court held that credit cannot be blocked beyond 10% of the disputed amount assessed, as this correlates to the statutory pre-deposit requirement under Section 107 of the CGST Act.

The Petitioner submitted that other High Courts such as Delhi, Gujarat and Telangana have also ruled against the concept of negative blocking, whereas the Allahabad and Calcutta High Courts have taken a contrary view.