GST Update

 Desk of CA. Praveen Sharma – 830 Series (CAPS) 

Bombay High Court in the case of DDS Jewels Private Limited

Key Takeaways – Rule 86A ITC Restriction Case

1. The petitioner challenged orders dated 02 July 2025 restricting ITC under Rule 86A CGST/MGST Rules, passed even before the reply deadline expired.

2. Notices issued on 30 June 2025 clearly directed the petitioner to respond by 03 July 2025, making them show-cause notices rather than mere intimations.

3. The petitioner filed a reply on 02 July 2025, received in the department’s office on 03 July 2025. Yet, the orders were passed prematurely on 02 July 2025.

4. The Court held that once a show-cause notice is issued, principles of natural justice require the authority to wait until the given timeline lapses.

5. Consequently, the impugned orders dated 02 July 2025 were quashed, and the department was directed to restore the taxpayer’s electronic credit ledger by 24 September 2025.

6. The department is permitted to re-decide the issue, but only after considering the reply dated 02 July 2025 and granting a personal hearing, no later than 10 October 2025.

7. The petitioner agreed not to use restored ITC until final disposal. However, if the department fails to act by 10 October, the taxpayer can freely utilise the credit.

Regards
CAPS