Whether negative blocking of credit ledger is allowed via the CGST Act, 2017?
While the above stated issue, is no longer res integra, however, the Madras High Court in the case of TVL. Skanthaguru Innovations Pvt. Ltd. v/s CTO [2024-VIL-1296-MAD] has recently issued a judgment that deviates from the following decisions-
A) M/s. Amit Metaliks Company v/s Joint Commissioner of State Tax, Enforcement Range [2024-VIL-1158-ORI] B) M/s Maa Sharda Endeavour Pvt. Ltd. v/s The State of Jharkhand [2024-VIL-1096-JHR] C) PMW Metal & Alloys Pvt Ltd v/s UOI [2024-VIL-1079-GUJ] D) Best Crop Science Pvt. Ltd. v/s Principal Commissioner, CGST Commissionerate, Meerut [2024-VIL-1047-DEL] E) M/s Laxmi Fine Chem v/s Assistant Commissioner, Malkajgiri & Others [2024-VIL-311-TEL] F) Samay Alloys India Pvt. Ltd. v/s State of Gujarat [2022-VIL-125-GUJ]
The Madras High Court observed the following –
1) The word “amount equivalent to such credit for discharge of liabilities” as mentioned in Rule 86A of the CGST Rules, 2017 would not only mean the available ITC in the ECL but also imply the fraudulent ITC which had been utilised for discharge of liabilities. If the ITC was utilised, the officer is also entitled to pass blocking orders for both of the utilised and the unutilised fraudulent ITC available in the ECL.
2) The officer would come to know regarding the fraudulent availment of ITC only after their utlisation/ availment. Further, in most cases, such ITC would not be available in the ECL at the time of passing orders.
3) If the Statute intended that negative blocking is not allowed, the same might have been carved out basis proviso or otherwise, however, this is not the case presently.
Owing to the above judgment, the Madras High Court proceeded to pass a contrary ruling on the said matter.
The copy of the order is as under:
