Notification No. 07

SGST High Court Cases

GST - Scope, Interpretation and ambit of Rule 86A of CGST Rules, 2017 – Mismatch between GSTR-2A and supplier’s GSTR-1 and GSTR-3B - Validity of blocking of electronic credit ledger for mismatch between the appellant’s input tax credit Form GSTR-2A with outward supplies furnished by suppliers in their respective GSTR-1 and GSTR-3B – Divergence of opinion with Gujarat High Court in Samay Alloys Case - HELD - The key word in Rule 86A of the CGST Rules which falls for interpretation is the “available” – the Gujarat High Court in Samay Alloys held that the word “available” shall mean that on the date when Rule 86A is invoked, electronic credit ledger should have a positive balance and in cases where the credit is NIL, the power under Rule 86A of the Act cannot be invoked - The cardinal principle of statutory interpretation is to read a provision so as to give its full meaning and purport and the presumption is no words used in the statute are useless and an interpretation which will make the statutory provision redundant has been frowned upon - In our respectful view, we are not able to persuade ourselves to the interpretation given in Samay Alloys rather the Bench is persuaded by the interpretation of the Rule 86A given by Allahabad High Court in M/s. R M Dairy Products LLP - The word “available” occurring in Rule 86A(1) cannot be read in isolation and when it is read along with the remaining words, “in the electronic credit ledger has been fraudulently availed or is ineligible”, “has been fraudulently availed” it would denote a situation which has occurred in the past – the allegations based on which the show cause notice has been issued is due to the mismatch between the input tax credit from GSTR-2A and GSTR-3B - Section 42(1)(a) not only refers to the mismatch in the returns for the same period but also for any preceding tax period. Therefore, to state that Rule 86A can be invoked only if there is a balance available in the credit ledger would tantamount to making the rule redundant and defeating the very purpose of enacting such a rule - the purport of Rule 86A appears to act as a deterrent pending adjudication of the alleged fraudulent availment or ineligible availment - in all situations when the returns of the appellant, the recipient and the returns of the other end dealer are compared and when mismatch is noticed, Section 42 will come into play. This is precisely what has occurred in the appellant’s case - in the present case, respondent on noticing the mismatch was of the prima facie opinion that credit for the relevant period is inadmissible. Therefore, the power under Rule 86A has been invoked in respect of availment of the input tax credit by the appellant - If the statute does not use the expression negative balance, such theory cannot be imported to justify the contention that there should be a positive balance to invoke Rule 86A of the CGST Rules - the appeal fails and the same is dismissed

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