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GST – Negative blocking of ITC - Interpretation of Rule 86A of the CGST Rules, 2017 - Blocking of Electronic Credit Ledger, Cross-Empowerment - Petitioner contended that the State Authorities had no jurisdiction to issue the impugned notice as the Central Authorities had already conducted an investigation and initiated proceedings for the same issue - Whether the State Authorities were empowered to issue Form GST ASMT-10 dated 26.09.2024, subsequent to the search conducted by the Central Authorities on 13.03.2024 - HELD - The search conducted by the Central Authorities was pertaining to Rs.6.33 Crores, whereas the jurisdiction of the State Authorities is about Rs.13.10 Crores. Though the issue raised by the Central Authorities and State Authorities is similar, the quantum of amount demanded by them are entirely different and the period of demand also differs. Thus, the question of cross-empowerment would not arise - the State Authorities were empowered to issue the Form GST ASMT-10 as the period and quantum of amount demanded by the State Authorities were different from the Central Authorities. Though the issue was similar, the State Authorities had the jurisdiction to initiate proceedings for the remaining period and amount not covered by the Central Authorities – Further, it is pre-mature to decide as to whether the State Authorities are barred by cross empowerment or not. Even if the State Authorities are barred by cross empowerment for initiation of proceedings against the petitioner, the blocking of ITC will always be the domain of State Authorities, which was also accepted by the Central Authorities, since the petitioners are registered person of the State Authorities - the term "available in the electronic credit ledger" in Rule 86A means the ITC that was made available in the ECL at any point of time for the purpose of discharging output tax liabilities, irrespective of whether it was available at the time of passing the blocking orders or not - the negative blocking of ITC was permissible under Rule 86A, therefore, the blocking orders were in accordance with the provisions of Rule 86A - the Hon'ble Division Bench of Gujarat High Court in Samay Alloys case and the Hon'ble Delhi High Court in Best Crop case, had no occasion to discuss with regard to the later part of the provisions of Rule 86A. Thus, in the absence of non-consideration of later part of provisions of Rule 86A, this Court is unable to follow the same – the writ petition is dismissed - Validity of Negative blocking of ITC - Interpretation of Rule 86A - HELD - a conjoint reading of 1st and 2nd parts of Rule 86A would clearly reveal that the word “available in the ECL” referred in 1st part would mean that the amount available after the fraudulent availment of credit at any point of time, whether it was available in the ECL or utilised at the time of passing the blocking orders. Hence, the 2nd part of Rule 86A empowers the Authorities not to allow the debit of amount equivalent to the fraudulently availed credit for discharge of liabilities under Section 49. If it was already utilised, the Officials are also empowered to pass blocking orders to the extent of amount equivalent to such credit, which was already utilised, along with the unutilised fraudulently availed ITC amount available in the ECL at the time of passing the blocking orders – the right way of interpretation of Rule 86A of GST Rules, 2017, is as to whether the fraudulently availed credit was made available for the payment of output tax liabilities at any point of time subsequent to the said fraudulent availment. Thus, the Rule 86A would apply to pass blocking orders by the State Authorities to the extent of fraudulently availed credit in ECL, whether it is available at the time of passing the blocking orders or not. If any amount is credited to the ECL subsequently, to the extent of amount mentioned in the blocking orders, the ECL cannot be debited. Thus, it is clear that after the fraudulent availment of ITC, if the same was available in ECL, for debit, at any point of time, the Department is entitled not to allow the debit of amount equivalent to such credit in ECL whether it is utilised or not and in the event, if the ITC was utilised upto the accumulation of credit to the extent of fraudulently availed/utilised credit - If the intention of the legislature is not to allow the negative blocking, they are supposed to have specifically prohibited the same by virtue of proviso or otherwise. In this case, no such prohibition is available and hence, in the absence of any such prohibition for negative blocking, the blocking referred in Rule 86A has to be construed for both positive and negative blocking. Therefore, the question of barring of negative blocking would not arise - the term "available in the electronic credit ledger" in Rule 86A means the ITC that was made available in the ECL at any point of time for the purpose of discharging output tax liabilities, irrespective of whether it was available at the time of passing the blocking orders or not - the negative blocking of ITC was permissible under Rule 86A, therefore, the blocking orders were in accordance with the provisions of Rule 86A - the Hon'ble Division Bench of Gujarat High Court and the Hon'ble Delhi High Court had no occasion to discuss with regard to the later part of the provisions of Rule 86A. Thus, in the absence of non-consideration of later part of provisions of Rule 86A, this Court is unable to follow the same.
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