2026-VIL-189-GUJ
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SGST High Court Cases

GST - Admissibility of Input Tax Credit on transfer of leasehold rights of sub-plots, Blocked Credit - Section 17(5)(d) of the CGST Act, 2017 – Petitioner is engaged in sub-plotting and transferring leasehold rights of GIDC plots, claimed Input Tax Credit on statutory charges paid to GIDC - Respondent issued notice alleging that such credit is blocked under Section 17(5)(d) as it related to the construction of immovable property - Whether the restriction on ITC under Section 17(5)(d) applies to the transfer of leasehold rights where no construction activity is undertaken by the taxable person – HELD - A plain reading of Section 17(5)(d) reveals that the legislative intent is to limit the bar on credit exclusively to expenditure incurred for the "construction" of immovable property. The legislative intent is clear that the bar on credit applied exclusively to construction related expenditure and the apportionment of credit and blocked credits relating to such business - The respondent failed to establish that the petitioner had undertaken any construction activity whatsoever, as the business was limited to the sub-division and transfer of leasehold rights. Consequently, the provision of Section 17(5)(d) does not even remotely apply to the petitioner’s activities. The allegation of availing blocked credit reflects a complete non-application of mind by the authority - Writ petition allowed and show-cause notice quashed - Extended period of Limitation - Validity of Show Cause Notice under Section 74 in the absence of intent to evade tax - Respondent issued an intimation and notice under Section 74(1) for recovery of ITC, despite the petitioner having already reversed inadvertently utilized credit through Form DRC-03 and discharging the entire output GST liability in cash - Whether the Revenue can invoke the extended period of limitation and penal provisions under Section 74 without proving fraud, willful misstatement, or suppression of facts – HELD – In the instant case, there is no evidence of fraud, willful misstatement, or suppression of facts to evade tax. The petitioner’s conduct in reversing the utilized ITC via DRC-03 demonstrated bona fides. Since the statutory pre-requisites for invoking Section 74 were not satisfied, the action of the respondent was without jurisdiction. When the jurisdictional facts for invoking a specific provision are absent, the petitioner cannot be relegated to alternative remedies of facing adjudication proceedings – The notice issued are set aside and respondents are directed to unblock the ITC in the electronic credit ledger.
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