India: Blocking of electronic credit ledger does not equal seizure of property (court decision)

A court decison concerning blocking of electronic credit ledger

A court decison concerning blocking of electronic credit ledger

The Bombay High Court has held that blocking an electronic credit ledger under rule 86A of the Central Goods and Services Tax Rules, 2017 is not akin to seizure or attachment of property.

The court further held that from the language used in rule 86A, two pre-requisites are to be fulfilled before blocking an electronic credit ledger.

  • First, the Competent Authority or the Commissioner must be satisfied on the basis of material available that blocking of the electronic credit ledger is necessary (i.e., wrongful or fraudulent availment of credit in the electronic credit ledger has occurred).
  • Second, there must be a recording of reasons in writing for such an exercise of the authority. 

The case is: Dee Vee Projects Ltd v. Government of Maharashtra

Summary

  • The taxpayer was engaged in infrastructure development and had a presence in various states of India.
  • The taxpayer in July 2021 noticed that its electronic credit ledger was not operational and was blocked by the Deputy Commissioner. The taxpayer's request to unlock the electronic credit ledger was rejected by the department. The taxpayer further submitted that it was at this time it learned that blocking of the electronic credit ledger was done under rule 86A of the Central Goods and Services Tax Rules, 2017.
  • The taxpayer then filed a writ petition to quash the blocking of the electronic credit ledger.

Read a February 2022 report [PDF 465 KB] prepared by the KPMG member firm in India

 

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