Facts of the Case

Jai Venktesh Concast Pvt. Ltd. and another petitioner filed a writ petition before the High Court at Calcutta challenging the action of the Assistant Commissioner of State Tax, Durgapur Charge, in blocking the petitioner's electronic credit ledger by an order dated 24th November, 2020. The matter, heard through video conference, came up before Justice Md. Nizamuddin on 09.03.2022. By the time of hearing, more than a year had elapsed since the blocking order was passed.

Issues Involved

  1. Whether a blocking order passed under Rule 86A of the West Bengal GST Rules, 2017 continues to have effect beyond the maximum one-year validity period prescribed under Rule 86A(3).
  2. Whether the petitioner was entitled to unblocking of its electronic credit ledger on expiry of that period, without the Court adjudicating the merits of the original blocking.

Petitioner's Arguments

  • In view of Rule 86A(3) of the West Bengal GST Rules, 2017, the impugned order blocking the credit ledger had lost its force, since the maximum period of validity of such a blocking order is one year from the date of imposing the restriction.
  • Since more than a year had passed since the order dated 24.11.2020, the restriction stood automatically lifted by operation of law.

Respondent's Arguments

  • Learned counsel appearing for the State respondents could not deny or dispute the petitioner's submission regarding expiry of the one-year period of validity of the blocking order.

Court Order / Findings

  • Considering the submissions of both parties, and the State's inability to dispute the expiry of validity, the Court held that the impugned order dated 24th November, 2020 had ceased to have any effect and had no force in the eye of law.
  • The Court clarified that the order was confined only to the aforesaid impugned blocking order and would have no impact on any other relevant proceedings between the parties.
  • The respondent concerned was directed to pass an effective order for unblocking of the electronic credit ledger within seven days from date.

Important Clarification

  • An order blocking input tax credit under Rule 86A of the CGST/SGST Rules automatically ceases to have effect on expiry of one year from the date of imposition, per Rule 86A(3), regardless of whether a fresh order is passed by the department; the taxpayer is entitled to unblocking of the electronic credit ledger on this ground alone, without the Court going into the merits of the original blocking.

Sections Involved

  • Rule 86A of the West Bengal GST Rules, 2017 — conditions of use of amount available in the electronic credit ledger.
  • Rule 86A(3) of the West Bengal GST Rules, 2017 — prescribes a maximum one-year validity for any restriction imposed under Rule 86A(1).

Decision – In Favour of

In favour of the Assessee — the credit ledger blocking order was held to have ceased to have effect, and unblocking was directed within seven days.

Related Case Laws

  • Note: a case-number collision exists with an unrelated pre-existing post bearing the same numerals under a different High Court and different parties (W.P.(C) 3696/2022, Delhi High Court); the two are unconnected matters and readers should rely on the court and party names to distinguish them.
  • Other Calcutta High Court rulings applying the one-year sunset clause under Rule 86A(3) of the GST Rules to direct unblocking of electronic credit ledgers.

Case Details

  • Court: High Court at Calcutta
  • Case No.: WPA No. 3696 of 2022
  • Coram: Hon'ble Justice Md. Nizamuddin
  • Date of Order: 09.03.2022

Link to Download the Order

You can view/download the order here.

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