Arise Steels Private Limited Vs Assistant Commissioner (ST)
Date: July 8, 2025
Subject Matter
ITC blockage cannot continue if an appeal is filed with the necessary pre-deposit
Summary
The case pertains to W.P(MD)No.18606 of 2025, where the petitioner filed for a Mandamus to instruct the first respondent to unblock its Input Tax Credit (ITC) of Rs.3,20,04,662/(including CGST of Rs.1,64,85,568/- and TNGST of Rs.1,55,19,094/-), which was blocked on two separate instances (on 22.05.2025 and 27.11.2024). - The blocking of the credit ledger was based on assessments conducted for the fiscal years 2022-2023 and 2023-2024. The petitioner had initiated an appeal against an assessment order dated 04.02.2025 under Section 107. - The respondents cited Rule 86A of the CGST Rules stating that the restrictions on the ITC must remain for one year as specified in Rule 86A(3). - The Court referred to a previous order (W.P(MD)No.20767 of 2023) where it was determined that if a petitioner files an appeal and deposits 10% of the disputed tax, the restrictions under Rule 86A(3) would be lifted. - Accordingly, the Court ordered that the respondents must unblock the petitioner’s ITC blocked on the referenced dates. The order is concluded with no costs and the disposition of connected miscellaneous petitions.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
W.P(MD)No.18606 of 2025 has been filed for a Mandamus to direct the first respondent to unblock the petitioner’s Input Tax Credit (ITC) under the Tamil Nadu Goods and Service Tax Act, 2017 (TNGST Act)/Central Goods and Service Tax Act, 2017 (CGST Act) amounting to Rs.3,20,04,662/-(CGST – Rs.1,64,85,568/- and TNGST – Rs.1,55,19,094/-) (blocked vide reference No.BL3305250000694 on 22.05.2025) and consequently, permit the petitioner to debit the corresponding ITC from its electronic credit ledger.
2. W.P(MD)No.18606 of 2025 has been filed for a Mandamus to direct the first respondent to unblock the petitioner’s Input Tax Credit (ITC) under the Tamil Nadu Goods and Service Tax Act, 2017 (TNGST Act) amounting to Rs.9,66,474/- (blocked vide reference No.BL3311240001088 on 27.11.2024) (CGST – Nil and TNGST – Rs.9,66,474/-) and consequently, permit the petitioner to debit the corresponding ITC from its electronic credit ledger.
3. By the impugned communications, dated 22.05.2025 and 27.11.2024, the electronic credit ledger of the petitioner have been blocked. It is noticed that the petitioner has now suffered an assessment order, dated 04.02.2025 for the period between 2022-2023 and 2023-2024. Against the said order, the petitioner has filed an appeal on 12.05.2025 under Section 107 of the respective Goods and Services Tax enactments, 2017.
4. The contention of the respondents is that the restrictions under Rule 86A of the CGST Rules has to remain in force for a period of one year in terms of Rule 86A(3).
5. Dealing with a somewhat identical situation, this Court passed an order on 13.09.2023 in W.P(MD)No.20767 of 2023 etc., batch in the case of New Royal Traders Vs Assistant Commissioner RAL, Alandur W.P(MD)Nos.18606 and 18607 of 2025 Assessment Circle, Nandanam, Chennai. The relevant portion of the order is extracted below:
5. As far as the writ petition at Sl.No.1 to the above table is concerned, the credit of Rs.37,71,590/- was blocked on 16.06.2023. The last date for due under 86A(3) of the CGST Rules will expire only on 15.06.2024. Meanwhile, the respondent has passed an Assessment Order on 08.08.2023.
6. The learned counsel for the petitioner submits that petitioner proposes to file an appeal against the aforesaid order dated 08.08.2023. It appears that the amount that was blocked is the amount which has been confirmed in the Assessment Order dated 08.08.2023.
7. Considering the fact that the petitioner proposes to file an appeal before the Appellate Authority, liberty is given to the petitioner to deposit 10% of the amount confirmed vide order dated 08.08.2023 through electronic cash register. The petitioner shall also file an appeal against the aforesaid order within a period time prescribed under Section 107 of the TNGST Act, 2017.
8. The credit amount of Rs.37,71,590/- that has been blocked shall be unblocked subject to the petitioner depositing 10% of the amount confirmed vide order dated 08.08.2023. It is made clear that if the petitioner fails to file an appeal within the statutory period prescribed under Section 107 of the TNGST Act, 2017, the respondent is at liberty to block the aforesaid credit amount that may be lying unutilized in the electronic credit ledger of the petitioner.
9. The Writ Petition Stands closed with the above liberty. No cost. Consequently, connected miscellaneous petitions are closed.
6. A reading of Paragraph Nos.5 to 9 of the aforesaid order indicates that if an appeal is filed by depositing 10% of the disputed tax, the restrictions under Rule 86A(3) of the CGST Act will come to an end. I find no other judgments that has a taken a contra view.
7. Considering the same, there shall be a direction to the respondents to unblock the petitioner’s Input Tax Credit, which was blocked on 22.05.2025 and 27.11.2024. The writ petitions stand disposed of with the above observations. No costs.