Supreme Court Rejects Plea Challenging Relief on GST ECL Blocking

In a recent case, the Supreme Court dismissed the Special Leave Petition(SLP) against the GST ( Goods and Services Tax ) order quashing the action of negative blocking on the Electronic Credit Ledger [‘ECL’].

A two-judge bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan acknowledged SLP originated from the final judgment and order dated 04-12-2024 passed by the High Court of Delhi, which was in favour of the taxpayer, Kings Security Guard Services Private Limited. In the absence of a case for interference, the Special Leave Petition has been dismissed by the court.

For the problem of negative blocking of the Electronic Credit Ledger [‘ECL’], the taxpayer has approached the High Court. The blocking operation on a negative balance is apparent from a perusal of the documents.

Upon the judgment rendered in Best Crop Science Pvt. Ltd. through Authorized Representative vs. Principal Commissioner, CGST Commissionerate, Meerut and Ors, the counsel placed reliance where in the court set aside the impugned order to the scope disallow debit from the respective ECL of the applicants, over the ITC available in the ECL during passing of the impugned orders.

As per the court, Rule 86A of the rules is not a machinery provision for the recovery of tax or dues under the CGST Act. It is not under the scheme of the machinery provisions for assessment and determination of the tax and dues, as subject to being paid under the CGST Act.

This is a temporary measure implemented to protect revenue by preventing the use of available ITC in the Electronic Credit Ledger (ECL). This action is taken when the Commissioner or an authorised officer has reasonable grounds to suspect that the GST input tax credit (ITC) has been wrongly claimed. However, the High Court has quashed and set aside the decision to impose a negative block on the ECL.