1. The basic design of GST postulates that the input tax credit (ITC) shall be seamlessly granted to the registered businesses to avoid the cascading effect of tax and also to ensure that the entire tax burden is transparently transferred to the end consumer. Said design also found mention in the Statement of Objects and Reasons accompanied in the CGST Bill, 2017 when it was introduced in the Parliament. Paragraph 4 of the said Statement specifically records that the design of GST is to allow seamless transfer of ITC from one stage to another in the chain of value addition which would also incentivize tax compliance. Therefore I submit that any restrictions imposed in curtailing the said seamless flow of ITC would have to be looked at minutely and an interpretation favoring the objective behind the implementation of GST should be adopted. With these words in the present article we shall deal with two such restrictions about ITC. One (Sec. 16(4)) deals with time-related restrictions and the other (Rule 86A) deals with the utilization related restrictions of the balance available in the electronic credit ledger. It may be noted that the reference in the present article is of the provisions of the CGST Act, 2017 but the same shall also be construed as a reference to the similar provisions under the SGST Act(s), 2017 unless stated otherwise.

Time-related restrictions u/s 16(4)

2. Before analyzing the provisions contained u/s 16(4) of the CGST Act, 2017 it is worthwhile to first reproduce the concerned provisions for ready reference:

“Sec. 16(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.”

3. Subsequently vide CGST (Second Removal of Difficulties) Order, 2018 dated 31-12-2018 following proviso has been added:

“Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

4. A conjoint reading of the original provision along with the subsequently added proviso would provide that the registered person cannot take the ITC in respect of an invoice or a debit note pertaining to an invoice after the due date for furnishing the return u/s 39 for September from the end of the FY to which the invoice pertains or the filing of the annual return, whichever is earlier. However, as an exception for FY 2017-18, being the first year of GST, proviso provides that ITC can be taken even after the normal cut-off date but till the due date for furnishing the return for March 2019 provided the details of invoices related to the said ITC have been uploaded by the concerned suppliers in GSTR – 1 till the due date of filing GSTR – 1 for March 2019. It may also be noted that Sec. 16(4) also stands amended vide Finance Act, 2020 to the effect that the said restriction in respect of a debit note shall be considered from the year in which such debit note is issued and not the year in which the invoice relating to such debit note was issued. However as the said amendment is yet to be notified the same is not discussed in the present article in detail.

5. Ordinarily a prudent registered person is expected to take the ITC within the time restrictions contained u/s 16(4) to avoid any litigation. In other words as an illustration ITC for the invoice pertaining to FY 2019-20 should be taken by the earliest of the two cut-off dates which will be 20.10.2020 (i.e. due date for September GSTR – 3B) as an annual return will be filed only after the said date.

6. Now the purpose of the present article is to examine the contentions which one can make if the ITC is sought to be taken after the above-stated cut-off date. We shall divide the contentions into two broad categories. The first category shall deal with whether such time-related restrictions can be imposed and the second category shall deal withthe stage of the entire process of taking the ITC at which the said restrictionswill be applied. Before discussing the same please note that restrictions contained u/s 16(4) do not apply to ITC of IGST paid on import of goods as the said restrictions only cover ITC related to the tax in respect of the invoice/debit note.

7. Now the first fundamental aspect deals with whether such time-related restrictions can be imposed or not. In this regard following contentions can be examined by the readers to say that such time-related restrictions may not be legally valid:

I. It can be contended that Sec. 16(2) of the CGST Act, 2017 starts with a non-obstante clause to the effect that notwithstanding anything contained in the entire Sec. 16, a registered person shall be entitled to ITC if he satisfies the four conditions given therein (viz. possessing requisite documents, receipt of goods/services, tax paid by the supplier to the Government and filing of the return by the recipient). Therefore I submit that as Sec. 16(2) starts with a non-obstante clause overriding all other provisions of Sec. 16 including Sec. 16(4) it can be contended that as long as all the conditions u/s 16(2) are satisfied which do not have any time-related restrictions, ITC cannot be restricted.

II. Despite the non-obstante clause in Sec. 16(2) one may contend that as the said provision deals with the entitlement of ITC whereas Sec. 16(4) deals with the taking of the ITC, and as both operate in separate domains they will continue to apply. In other words a registered person may be entitled to ITC u/s 16(2) on the satisfaction of the four conditions but would not be able to take the said ITC if he crosses the time restrictions contained u/s 16(4). Now one of the conditions for a registered person to be entitled to ITC u/s 16(2) is that he must have furnished the return u/s 39. The process of availing the ITC,as we shall see later,happens in the records maintained under the law and the said amount isthen credited in the electronic credit ledger by way of the reflection of the same in the return filed u/s 39. Therefore I submit that Sec. 16(2) not only provides for the conditions to become entitled to ITC but also provides for the condition to get the availed ITC reflected in the electronic credit ledger by way of filing of the return. Once the said proposition is found valid, given the non-obstante clause in Sec. 16(2) overriding all other provisions of Sec. 16, Sec. 16(4) cannot curtail the taking of the said already entitled ITC and validlyreflected in the electronic credit ledger.

III. The amendment in Rule 61(5) by categorizing GSTR – 3B as a return u/s 39 and therefore to say that the restrictions contained u/s 16(4) shall apply must be seen in light of why the said restrictions have been provided and originally linked the same with GSTR – 3 and not GSTR – 3B. Rule 4(iv) of GST Settlement of Funds Rules, 2017 provides that the GSTN must send a report of the ITC remaining unutilized (to be read as unavailed in the context) because of restrictions u/s 16(4) so that the said money can be apportioned between the Centre and the States (same for unavailed CGST as well as SGST). Said report would be generated from the exact amount of ITC not availed which would have been available only in the GSTR – 1, 2 & 3 system wherein a supplier would have reported a B2B transaction in GSTR – 1 whereas the recipient would not have matched the same and intimated the ITC claim in the portal by filing GSTR – 2. In the GSTR – 3B regime due to the absence of matching and hence not knowing the exact amount of unavailed ITC, Sec. 17(2A) came to be inserted in the IGST Act, 2017 vide IGST (Amdt.) Act, 2018 to provide for the ad hoc apportionment of the monies lying in the IGST credit ledgers. Therefore I submit that the original reference to GSTR – 3 in Sec. 16(4) was based on the entire mechanism of matching and apportionment of the monies of the unavailed ITC. Now GSTR – 3B being only a summary return (ref para 8.6.6. of the 17th GST Council Meeting Minutes) cannot take the place of GSTR – 3 for Sec. 16(4) given the above discussion. Hence it can be contended that a retrospective amendment in Rule 61(5) to make GSTR – 3B a return u/s 39 cannot be read while interpreting Sec. 16(4) and hence the last date to avail the ITC would be the date of filing of the annual return. This would also be in line with the principle that in an environment where periodically only summary returns in the form of GSTR 3B are to be filed without matching, last opportunity for availing the ITC at the time of finalizing the annual return working especially when the unavailed ITC stands already reflected in GSTR 2A has to be permitted.

IV. Without prejudice to the above contention, it may be noted that GSTR – 3B initially was not a return u/s 39. Time limits stipulated u/s 16(4) only applies in the context of a return u/s 39. It is only by way of CGST (Sixth Amendment) Rules, 2019 notified vide Notification No. 49/2019 – Central Tax dated 09.10.2019 that with a retrospective effect Rule 61(5) was amended to provide that GSTR – 3B is a return u/s 39. Therefore we submit that the vested right created before the date of the said amendment to avail the ITC (wherein the restrictions were not linked to GSTR – 3B but to GSTR -3 which now stands annulled) cannot be taken back. Support for the said proposition can be taken from the Hon’ble Supreme Court decisions in the case of Dai Ichi Karkaria Ltd. 1999 (112) E.L.T. 353 (S.C.) and Eicher Motors Ltd. 1999 (106) E.L.T. 3 (S.C.).

V. Consider a situation wherein a registered person intends to avail the ITC within the stipulated time frame but is prevented from availing the same as he does not have sufficient funds to pay the net liability in cash and file the return. As per the current design of the GSTN portal, GSTR – 3B cannot be filed in which ITC has been reflected unless the net tax amount for the given tax period is also paid. This is contrary to the legal provisions as in Sec. 39 merely links return filing due date with the payment due date but nowhere provides that the return can be filed only after making the payment. It is also a settled principle that law must excuse an impossible duty. Support can be drawn from the decision of Hon’ble Supreme Court in the case of Cochin State Power & Light Corporation Ltd. v. The State of Kerala AIR 1965 SC 1688 wherein it has been held that “the performance of this impossible duty must be excused following the maxim, lex non cogitate ad impossible (the law does not compel the doing of impossibilities)”. Therefore time-related restrictions cannot apply in such situations.

VI. It can also be contended that Article 300A of the Constitution provides that no person shall be deprived of his property save by the authority of law. It has been held that the said authority of law needs to be reasonable (see K.T Plantation Pvt. Ltd. Vs. State of Karnataka (2011) 9 SCC 1). As submitted above, GST is a destination-based value-added tax system wherein all the entities in the chain of transactions till the final destination are called to pay tax after adjusting the ITC which is as good as the advance tax paid.Hence ITC is a property of the concerned registered person and the said property cannot be denied by way of not allowing the credit merely due to time-related procedural limitations. This is more relevant especially when the GST is a new law and enough confusion prevails in the mind of the taxpayer as well as the department (evident from AAR) coupled with the fact that already time has been extended for FY 2017-18.

VII. The above contentions would equally apply when it comes to claiming ITC based on self-invoice prepared u/s 31(3)(f) of the CGST Act, 2017 in case of the tax payable under RCM for supplies received from unregistered suppliers. This is because the entire mechanism of providing the time limits has been inserted to identify the unavailed ITC reported in GSTR – 1/2 but not claimed in GSTR – 2 (which is now suspended). Now for the reporting of the self-invoice the same was required to be done in GSTR – 2. In absence of the same, we can contend that the mechanism of apportionment of revenue concerning unavailed ITC as envisaged u/s 16(4) would fail even in this scenario (moreover in case of RCM the tax is paid by the same registered person who intends to avail the ITCand hence the question of apportionment would not arise as opposed to forward charge). Hence the said time-related restrictions would not apply. Further as also stated before, Sec. 16(2) overrides Sec. 16(4) and in the absence of time limits in Sec. 16(2), ITC should be available even if the same is claimed beyond the stipulated time.

VIII. It is also submitted that the restrictions contained u/s 16(4) is for the invoice “for the supply” of goods/services whereas the self-invoice prepared by the recipient u/s 31(3)(f) for discharging the tax under RCM is an invoice prepared “for the receipt” of goods/services. It must be noted that the recipient while discharging the tax under RCM do not become the deemed supplier. Further the proviso inserted u/s 16(4) for FY 2017-18 permitting the taking of ITC beyond the normal time limits provides for the condition that the details of the relevant invoice should be reported by the vendor in GSTR – 1. Hence invoicesthe details of which are reportable in GSTR – 1 (invoice for supplies) are only sought to be covered u/s 16(4). Therefore it can be said that the restrictions would not apply to cases where ITC is related to self-invoice details of which are not reportable in GSTR – 1 (only invoice numbers are to be mentioned) but are reportable in GSTR – 2.Without prejudice, it can also be contended as explained later, that the restriction contained u/s 16(4) even if applied would apply only qua the year in which the self-invoice is prepared and not qua the year in which the underlying supplies would have been received.

IX. We may also state that the Hon’ble Supreme Court decision in the case of Osram Surya P. Ltd vs Commissioner of Central Excise (2002) 122 TAXMAN 0583 did not rule on the legal validity of the time-related restriction of six months for availing MODVAT credit (as it was not the question before the Court) but only considered the issue as to whether the same can apply to invoices issued before the imposition of the said restriction or not. We also observe that the decision of the Hon’ble Supreme Court in the case of ALD Automotive Pvt. Ltd. v. CTO 2018 (364) ELT 3 (SC) wherein the validity of time-related restrictions contained u/s 19 of the TNVAT Act, 2006 was upheld is clearly distinguishable from the present case based on the language used as well as the context as discussed in thecontentions above.

8. Now we shall discuss the second fundamental aspect as to at what stage shall the said restriction apply in the entire process of claiming the ITC.

9. Sec. 16(1) inter alia provides that a registered person is “entitled to take” the credit of the tax charged on any supply of goods or services or both which are used or intended to be used in the course or furtherance of business. It further provides that the said amount of ITC shall be credited to the electronic credit ledger of the given person. Therefore at this stage we can conclude that the stage of “taking the credit” is different from the stage in which the said amount is credited in the electronic credit ledger.

10. Further Rule 36(2) of the CGST Rules, 2017 provides that a registered person can avail the ITC only if the document (e.g. tax invoice) available for claiming such credit contains all the necessary particulars and the said information is furnished by the registered person in GSTR – 2. Sec. 35(1)(d) of the CGST Act, 2017 provides that a registered person shall be required to maintain the record of the ITC availed. Hence it would appear that the act of taking the credit in the records to be maintained by way of ensuring that the documents contain the necessary particulars and the same are submitted in form GSTR – 2 is a precursor to the reflection of the said ITC in the electronic credit ledger on a provisional basis by filing GSTR – 3. Now in the absence of GSTR – 2 we can say that a registered person can avail the credit as soon as the document containing the relevant particulars are made available. This also brings us to Sec. 16(2) which clearly deals with the entitlement of ITC and not the taking of the said ITC. Said provisions provide for the satisfaction of four conditions (viz. possession of relevant documents, receipt of goods/services, tax paid by the suppliers to the Government and return filed u/s 39). Now out of the said four conditions it cannot be said that all must be satisfied before the stage of taking the ITC. This is because the actual payment condition and the return filing condition can be satisfied only after the taking of the ITC as otherwise no registered person can avail and utilize the ITC of the preceding tax period unless he files the return first and the tax is paid by the concerned suppliers. This cannot be the intention of Sec. 16(2). The same is also apparent as discussed above from the fact that Sec. 16(2) only deals with the conditions for entitlement of ITC and not for taking of the ITC. Therefore I submit that only first two conditions (viz. possession of document already part of Rule 36(2) and receipt of goods/services (in certain situations even the requirement of receipt can be satisfied post facto)) needs to be fulfilled before availing the ITC in the records maintained and the other two can be met post such availment. Said conclusion also gets support from the fact that the filing of return has been made as a condition to become entitled to ITC u/s 16(2) and not for taking the ITC. Hence we submit that on receipt of the goods/services for use in the business and on possession of the relevant documents, ITC can be availed in the records maintained u/s 35.

11. Now once the said ITC is availed in the recordsit was to be provisionally credited in the electronic credit ledger as per Sec. 41 for matching which was to be undertaken by the GSTN portal as per Sec. 42 & 43. Once the ITC matched the provisional credit would get converted into final credit. Therefore I submit that the process of reflection of the said ITC in GSTR – 3B, and in the absence of matching, is only a second step post the availment of ITC in the records to get the availed amount credited in the electronic credit ledger for subsequent utilization/refund. One can also draw support from the Hon’ble Apex Court decisions in the case of Chandrapur Magnet Wires (P) Ltd. V. CCE 1996 (8) ELT (SC) andCCE VS. Bombay Dyeing& Mfg. Co. Ltd. 2007 (215) ELT 3 (SC) as well as Hon’ble Gujarat High Court decision in the case of CCE Vs. Ashima Dyecot Ltd.2008 (232) ELT 580 (Guj) wherein it has been held that debit in the CENVAT records posts the credit in the said records shall tantamount to non-availment of the MODVAT/CENVAT credits and therefore in absence of any subsequent debit in the said register, the credit in the register would tantamount to the availment of the said credits. We also rely on the decision of Hon’ble CESTAT in the case of CCE v. Ford India Ltd. 2012 (284) E.L.T. 202 (Tri. – Chennai) wherein it has been held the date of availment of CENVAT credit would be the date on which entries are made in RG – 23 Part – I record. In the said decision it was also observed that the Supreme Court decision in the case of Osram Surya Pvt. Ltd. (supra) did not deal with the issue as to when it can be said that the credit has been availed. Hence we can conclude that the ITC availment first happens in the records maintained by the taxpayer and the return filing process is merely a reflection of the said ITC for credit in the electronic credit ledger to allow for the utilization/refund.

12. Once the above proposition is adopted, Sec. 16(4) provides for the restrictions for the taking of the ITC and not the reflection of the same in GSTR – 3B for getting the said amount credited in the electronic credit ledger. Thus it can be said that as long as the registered person has availed the ITC in the books of accounts (which will be a record u/s 35 as far as ITC availment is concerned) before the cut-off date prescribed u/s 16(4), the same can be said to be in order.

13. For ITC of the tax payable under RCM on the supplies received from unregistered suppliers it can be contended that Sec. 16(4) even if it applies would apply qua the year in which the self-invoice is issued and not qua the year in which the underlying supplies would have been received. A delay in raising the self-invoice may have certain other consequences in terms of penalties for violation of time of supply provisions however the same cannot be inferred to the effect that the delayed self-invoice would relate to the actual date of the receipt of goods/services. This is because the time-related restriction u/s 16(4) has a nexus with the date of the document and not the date of the actual receipt of goods/services. Had it been so the said provision would have linked the restriction with the actual receipt date of goods/services and not the date of the document. Therefore it can be contended that the ITC of the self-invoice even if made in FY 2019-20 for the underlying supply received in FY 2017-18 would remain ITC of FY 2019-20 and accordingly Sec. 16(4), if at all, would apply.

Hence we conclude that the time-related restrictions imposed u/s 16(4) is not that simple to interpret and take a position. All the above contentions must be examined in detail before making any decision.

Rule 86A – Blocking of the Electronic Credit Ledger

14. Rule 86A came to be inserted vide Notf no. 75/2019 – CT dt 26.12.2019. Said Rule in a nutshell grants power to restrict the utilization of the balance lying in the electronic credit ledger in certain circumstances. Before discussing the said Rule, it is important to understand whether the provisions of the Act enable the Government to prescribe such a Rule.

15. Generic rulemaking power contained u/s 164 of the CGST Act, 2017 can be exercised only for carrying out the provisions of the Act. Hence there must be a provision in the Act that authorizes or provides for the formation of any rule. Sec. 49(4) of the CGST Act, 2017 provides that the amount available in the electronic credit ledger may be used for making any payment towards output tax in such manner and subject to such conditions and within such time as may be prescribed. Therefore the authority granted by the Act to the Executive by way of a delegated legislation concerning the utilization of the amount available is limited to the manner and subject to such conditions as prescribed. Now the complete ban on the utilization of the said balance is not concerning any manner of utilization. Hence we need to only consider whether the power granted to prescribe conditions for utilization of the said balance can be said to also grant the power to restrict in toto?

16. The power granted by Sec. 49(4) is only to prescribe the procedural conditions enabling the utilization of the balance and cannot be interpreted to restrict its utilization of the ITC duly availed following the law. Therefore on this ground itself it can be contended that Rule 86A is going beyond the provisions of the Act and is thus ultra vires.

17. Presuming that the power to prescribe the conditions would also include the power to restrict, it must however be seen as to whether the exercise of said power results in an excessive delegation or not. This is because excessive delegation is not permissible and the rule made by exercising the same would not be valid. Hon’ble Supreme Court in the leading case on the subject of Vasantlal Maganbhai Sanjanwala vs The State Of Bombay 1961 SCR (1) 341has held that the delegation by an Act can be proper only if the same is done by setting the proper framework and guidance within which the delegated authority can exercise the power.Improper exercise of a vague and arbitrary power to change the policy of the Act (in the present case without challenging the availment of ITC by following the principles of natural justice in the form of SCN but straight away blocking the utilization of the balance) would be a case of excessive delegation not permitted in law. Hence in the present case exercise of rulemaking power to change the policy of the Act (which nowhere permits for the blockage of electronic credit ledgers) would be a case of excessive delegation and hence even on this ground it can be contended that the Rule 86A is not just and proper.

18. Having discussed the validity of the new Rule we shall now go into the detailed discussion of the Rule itself presuming it to be valid. Before discussing the circumstances in which the power to restrict the utilization of the balance available in the electronic credit ledger can be invoked it is worthwhile first to discussthe vital aspect dealing with the conditions related to the reason to believe to be satisfied for invocation of the said Rule. The relevant part of Rule 86A for our discussion reads as under:

“Rule 86A(1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible inasmuch as –

………………….

may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount”

19. Above Rule, therefore, provides that the officer exercising the power should have “reasons to believe” that the case in question falls in the given circumstances (which are discussed later) and said reasons are to be recorded in writing.

20. Hon’ble Supreme Court in the case of Union Of India vs Mohan Lal Capoor & Others 1974 SCR (1) 797 (SC) has held that reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Therefore the reasons leading to the exercise of the power granted by the Rule must be based on rational nexus and not on any conjecture or surmises. The reasons recorded must be relevant and germane to the content and scope of the power conferred by the statute and must show a reasonable nexus between the facts considered and satisfaction reached (P.K. Chowdhury and others v. Union of India and others (MP) 1976 MPLJ 690 (MP)).

21. Further Hon’ble Supreme Court in the case of Ajantha Industries And Ors vs Central Board Of Direct Taxes 1976 SCR (2) 884 (SC) has held that the requirement of recording the reasons as a matter of principle of natural justice would also encompass the requirement of communicating such reasons to the taxpayer to enable the taxpayer who is prejudicially affected to challenge the decision.

22. Therefore I submit that the requirement of recording the reasons would also encompass the requirement of communicating such reasons to the taxpayer whose electronic credit ledger is sought to be blocked. An unreasonable exercise of the power can be challenged in the Courts.

23. Lastly let us consider the circumstances which can permit the exercise of the given power. It may be noted that Rule 86A can be invoked only if ITC available in the electronic credit ledger has been “fraudulently availed or is ineligible” in the given circumstances. Hence I submit that the circumstances discussed below would not ipso facto authorize invocation of the rule unless it has been established that the ITC in the given situations has been fraudulently availed or is ineligible. This is because as we shall see later one of the circumstances which enable the invocation of the Rule is that the tax in respect of which ITC has been availed has not been paid by the concerned suppliers. Now merely non-payment of tax by the suppliers in an otherwise genuine transaction will not make the said ITC as “fraudulently availed or ineligible”. Therefore I submit that the test of ITC being “fraudulently availed or ineligible” shall have to be satisfied before the invocation of the Rule.

24. Now five circumstances have been provided under which the Rule can be invoked if the ITC has been “fraudulently availed or is ineligible” in the given circumstances. Circumstances are as under:

Clause Circumstances Remarks
(a)(i) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 –

(i) issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained or

It must be shown from the facts that the supplier is non-existent or not conducting business from his registered place.
(a)(ii) without receipt of goods or services or both It must be shown from facts that goods or services have not been received and ITC has been availed.
(b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government As discussed earlier mere non-payment of tax by the suppliers cannot disentitle the ITC in an otherwise genuine transaction. Courts in the pre-GST era have read down the actual payment condition and applied only innon-genuinecases. Therefore as mere non-payment cannot make the ITC ineligible we are of the view that said clause can be invoked only if it has been found that the transaction was not genuine.
(c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained The taxpayer whose credit ledger is sought to be blocked should be found to be non-existent or not conducting business from the registered place of business.
(d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36 It must be shown that the given documents are not available in respect of which ITC has been availed.

25. Before we conclude we also submit that as per Rule 86A(3) the restriction imposed shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.

26. Based on the above discussions we can conclude that the power granted by Rule 86A needs to be exercised by the department with caution and any undue or unreasonable exercise can be challenged in the Courts for appropriate relief.

Present article was first published in the Chamber of Tax Consultants Journal.

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