Delhi High Court: Revenue Department Cannot Block ITC Beyond Available Credit in Electronic Credit Ledger

In a significant ruling, the Delhi High Court in the case of Best Crop Sciences Private Limited v. Principal Commissioner, CGST Commissionerate, Meerut and Ors. [W.P. (C) 10980/2024 dated September 29, 2024], has held that the Revenue Department is not empowered to block Input Tax Credit (ITC) in excess of the credit available in the Electronic Credit Ledger (ECL) under Rule 86A of the Central Goods and Services Tax Rules (CGST Rules).

The court stated that Rule 86A cannot be invoked in cases where there is no credit available in the ECL or the credit has already been utilized. This decision emphasizes that blocking ITC must be limited to the amount present in the ECL, and any excess blockage would be legally unsustainable.

Key Takeaways:

No Excess Blocking: The Revenue Department cannot block ITC beyond the amount available in the Electronic Credit Ledger.

Limitation of Rule 86A: Rule 86A can only be invoked if credit exists in the ECL. If credit is already utilized or not available, the rule is inapplicable.

Protection for Taxpayers: The ruling offers clarity and protection to taxpayers, ensuring that blocking of ITC must align with available credit.

This ruling reinforces the principles of fair application of the CGST Rules and offers relief to businesses facing undue blockage of their ITC.

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