Telangana HC: Revenue Can't Block Credit Ledger with Negative Balance

Quick Summary

The Telangana High Court has ruled that the Revenue Department cannot block an assessee's Electronic Credit Ledger by creating a negative balance. Instead, if input tax credit has been wrongly availed, the department must pursue recovery proceedings under Sections 73 or 74 of the CGST Act. The court found that blocking the ledger with a negative amount contravenes Rule 86(A) of the CGST Rules, which only permits blocking available credit, not creating a deficit.

Court :
Telangana High Court

Brief :
The Hon'ble Telangana High Court in Laxmi Fine Chem v. Assistant Commissioner [W.P No. 5256 of 2024 dated March 18, 2024] held that in case assessee has wrongly or fraudulently availed input tax credit ("ITC"), the Revenue department should initiate appropriate recovery proceedings under Section 73 or 74 of the Central Goods and Services Tax Act,2017 ("the CGST Act") rather than invoking Rule 86(A) of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules").

Citation :
W.P No. 5256 of 2024 dated March 18, 2024

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