Padmavathi Electrometals (P) Limited Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court)
In a significant legal victory, the Karnataka High Court recently ruled in the case of Padmavathi Electrometals (P) Limited vs Assistant Commissioner of Commercial Taxes regarding the blocking of Input Tax Credit (ITC) under GST rules. The court’s decision centered on the legality of such actions after the lapse of a one-year period.
The petitioner, Padmavathi Electrometals (P) Limited, contested the notice issued by the Assistant Commissioner of Commercial Taxes, Karnataka, dated April 21, 2023. The notice, along with subsequent actions in May and June 2023, blocked the company’s Credit Ledger under Rule 86A of CGST/IGST Rules, 2017. This blocking was purportedly due to concerns over the legitimacy of claimed ITC.
Under Rule 86A(3) of the GST rules, the blocking of ITC is permissible for a maximum period of one year. The petitioner argued against the legality of the action, stating that the one-year period had expired by the time of the court’s intervention.
The Karnataka High Court, in its order dated May 19, 2023, acknowledged the lapse of the one-year period and set aside the order to block ITC. Consequently, the Credit Ledger blocking actions taken on May 20, 2023, June 3, 2023, and June 5, 2023, were also annulled.
