GST Update

 Desk of CA. Praveen Sharma – 1088  Series (CAPS) 

MADRAS HIGH COURT IN THE CASE OF Zigma Machinery & Equipment Solutions v. Assistant Commissioner, Coimbatore-I Division

 Zigma Machinery & Equipment Solutions v. Assistant Commissioner, Coimbatore-I Division

 Decision: In favour of the Respondent

Madras High Court Upholds Negative Blocking of Electronic Credit Ledger for GST Recovery

The Madras High Court, in Zigma Machinery & Equipment Solutions v. Assistant Commissioner, Coimbatore-I Division, upheld the Department’s power to block an Electronic Credit Ledger, including by creating a negative balance, for recovering determined GST dues.

The dispute related to an assessment order covering multiple tax periods between 2017 and 2020. The company challenged the assessment separately, arguing that different tax periods could not be clubbed together. It also questioned the blocking of its Electronic Credit Ledger.

The company contended that an interim stay on recovery made the continued blocking invalid. It further argued that Section 79 of the GST law does not expressly authorise the creation of a negative credit balance.

The High Court rejected these arguments. It explained that Rule 86A and Section 79 operate at different stages. Rule 86A is a provisional measure used to restrict suspected ineligible ITC. Section 79, however, provides broad powers for recovering dues after the tax liability has been determined.

Accordingly, the Court upheld the Department’s action and decided the matter in favour of the Revenue.

Key takeaway: After GST liability is determined, Section 79 may be invoked to block the Electronic Credit Ledger, including through negative blocking, for recovery of outstanding dues.

LINK:CA. Praveen Sharma on Linkedin

Regards
CAPS