Finding that no further proceedings have been initiated against the petitioner, and there is no other fresh ground on which the blocking of the Input Tax Credit (ITC) has been renewed, the Punjab & Haryana High Court held that the subsequent blocking of the petitioner’s ITC by the Revenue Department after a period of one year is unsustainable.
Since the blocking of the ITC beyond the period of one year on the same very ground is clearly not tenable, the High Court set aside the order of such blocking.
The Division Bench comprising Justice Lisa Gill and Justice Parmod Goyal observed that a period of one year is sufficient for the revenue to conclude its investigation, and under the garb of renewal, a provisional attachment order cannot continue with no change in circumstances.
Referring to the decision of the Apex Court in the case of Kesari Nandan Mobile vs Office of Assistant Commissioner of State Tax (2), Enforcement Division (Civil Appeal No. 9543 of 2025), the Bench reiterated that the provisional attachment is a pre-emptive measure to protect the interests of government revenue and, thus, cannot be employed as a measure of recovery.
Reference was made to Rule 86A of the CGST Rules, 2017, and Section 83 of the CGST Act/ Haryana GST Act, 2017, to observe that the restriction shall cease to have effect after expiry of a period of one year from the date of imposition of such restriction. At the same time, the provisional attachment, which was carried out to protect revenue in certain cases, shall cease to have effect after the expiry of a period of one year from the date of the order made under Section 83(1).
Briefly, the petitioner, a partnership firm engaged in the business of manufacturing brass/copper sheets and utensils, had availed ITC in accordance with Section 16 of the Haryana GST Act, 2017. However, without any prior communication, ITC of the petitioner to the tune of Rs. 82.50 lacs in its ECL was blocked. Reference was made to the intimation uploaded on the online portal in respect to the blocking of Input Tax Credit (ITC) of recipients of M.S. Trading Company, on the ground that it was found non-existent at its principal place of business, and that it appeared from perusal of GSTR-1 return filed by the supplier that it had passed on ITC to various firms.
The petitioner, after the blocking of its ITC, submitted a detailed representation while explaining that it is a bona fide purchaser and has availed ITC based on the purchased documents. Upon considering the representation, ITC to the tune of Rs. 27.48 lacs was unblocked, but the remaining amount stood blocked. Later, even though in terms of Rule 86A(3) of the CGST Rules, the ITC can be blocked only for a period of one year, however, the Department yet again blocked the ITC to the tune of Rs. 82.50 lacs in the petitioner’s ECL for the same reason, i.e., regarding investigation with respect to M.S. Trading Co.
Case Relied On:
Kesari Nandan Mobile vs Office of Assistant Commissioner of State Tax (2), Enforcement Division (Civil Appeal No. 9543 of 2025)
Appearances:
Advocates Aman Bansal and Bharat Jain, for the Petitioner/ Taxpayer
Senior Advocate Sourabh Goel, for the Respondent/ Revenue
