Rule 86A of the CGST Rules, 2017--- Blocking o ITC Credit  —- The petitioner challenged the action of the respondents in blocking the Input Tax Credit of Rs.1,37,17,022/-, blocked on 11.02.2020. The allegation against the petitioner is that he had not paid the consideration for supplies received from D.G. Impex within the period of 180 days and therefore, was liable to pay interest on availed ITC. The court observed that Rule 86A indicates that the restriction, can be imposed only where the ITC available in the ECR has been “fraudulently availed” or is “ineligible” as specified in the said Sub-Rule. There is no allegation that the petitioner has fraudulently availed the ITC lying to the petitioner’s credit in the ECR. It is trite law that statutory provisions empowering harsh measures such as freezing the assets of a person, have to be strictly construed. A conjoint reading of Rule 37  and the proviso to Section 16(2) states that a taxpayer is entitled to avail of ITC in the first instance even though he has not paid the supplier for the goods/services. He has to, however, reverse the same with interest, as a part of his output liability, if he does not make the payment to the supplier within the stipulated period of 180 days. The action of the respondents to continue blocking the ITC available in the ECR of the petitioner for such extended period is without the authority of law.

Held that:- The Hon’ble High Court directed the respondents to forthwith unblock the ITC available to the petitioner in his ECR.