No, the Honorable Telangana High Court in Laxmi Fine Chem v. Assistant Commissioner [W.P. No. 5256 of 2024 dated 18.03.2024] held that in case assessee has wrongly or fraudulently availed input tax credit, the Revenue department should initiate appropriate recovery proceedings under section 73 or 74 of the Central Goods and Services Tax Act, 2017, rather than invoking Rule 86(A) of the Central Goods and Services Tax Rules, 2017. The Honorable Telangana High Court noted that plain perusal of the impugned order under challenge shows that the Revenue department has made a negative credit in the electronic credit ledger of the Petitioner which otherwise is not permissible and that is permissible is only blocking the availing of the input tax credit to whatever is in a credit of the Petitioner. The Honorable Court relied upon the judgment of the Gujarat High Court in the case of Samay Alloys India Pvt. Ltd. [GST 338/2022 (61) G.S.T.L. 421] wherein it was held that in case where credit is fraudulently availed and utilised, appropriate proceeding under the provisions of Section 73 or section 74 of the CGST Act, as the case may be, may be initiated. Further, noted that Rule 86A of the CGST Rules is not the rule that provides for debarring the registered person from using the facility of making payment through the electronic credit ledger. In case the intention was to disallow future debits or credit in a electronic credit ledger, the text of the rule would be entirely different. The Honorable Court stated that Rule 86A of the CGST Rules, empowers the proper officer to disallow debit from the electronic credit ledger for an amount equivalent to the amount claimed to have been fraudulently availed, and if no input tax credit was available in the credit ledger, the rules does not provide for insertion of negative balance in the ledger. The Honorable Court held that the action on the part of the Revenue Department in passing an order of negative credit was contrary to Rule 86(A) of the CGST Rules.
Author’s Comments
There are only five (5) reasons for which the pre-emptive and emergency power under Rule 86A can be invoked. And if there are only other reasons, not falling with these, the use of this exceptional power would be contrary to law. Blocking the use of input tax credit, which is a vested and indefeasible right in the nature of the property of a Registered Person, would be institutionalized theft. Passion to protect the interests of the Revenue does not authorize bypassing the law.
It is advisable to call for reasons to believe by the Commissioner or any other officer authorized whenever Rule 86A is used for pre-emptive action.
Moreover, this decision by the Commissioner or any other authorized officer is a non-appealable decision, although not specified u/s 121 of the Act.
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