Facts of the Case

The petitioner, Wipro Ltd, filed a writ petition challenging the legality and validity of Rule 86A of the CGST Rules, alleging it to be arbitrary and bad in law.

The petitioner also sought relief against the continued blocking of Input Tax Credit (ITC) amounting to ₹8,72,22,741, which remained blocked beyond one year.

It was contended that as per Rule 86A(3), such restriction automatically ceases after one year from the date of imposition. However, despite expiry of the said period on 25 January 2021, the ITC was not unblocked.

Further, the petitioner had made representations dated 15 June 2021 and 17 September 2021, but no response or justification was provided by the authorities.

Issues Involved

  1. Whether blocking of ITC beyond one year violates Rule 86A(3) of CGST Rules, 2017.
  2. Whether failure to provide reasons for blocking ITC amounts to violation of principles of natural justice.
  3. Whether the respondent authority is obligated to pass a reasoned order on representations made by the petitioner. 

Petitioner’s Arguments

  • The blocking of ITC was illegal, arbitrary, and without justification.
  • No reasons were provided by the respondent, thereby violating natural justice principles.
  • As per Rule 86A(3), restriction on ITC cannot continue beyond one year.
  • Despite lapse of statutory period, the ITC remained blocked.
  • Multiple representations were made, but the respondent failed to respond or act.

Respondent’s Arguments

  • The respondent’s counsel accepted notice but stated that no instructions were available in the matter at the time of hearing.

Court’s Findings / Order

The Delhi High Court disposed of the writ petition with the following directions:

  • Noted that the petitioner’s representations had not been decided till date.
  • Directed the respondent authority to decide the representations dated 15 June 2021 and 17 September 2021.
  • Such decision must be made by a reasoned order in accordance with law.
  • The decision must be taken within four weeks.
  • All rights and contentions of parties were kept open.

Important Clarification

  • The Court did not adjudicate the constitutional validity of Rule 86A.
  • It emphasized the necessity of:
    • Passing reasoned orders, and
    • Deciding representations within a reasonable time.
  • The ruling highlights that administrative inaction cannot continue indefinitely, especially when statutory timelines are prescribed.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:4221-DB/MMH16122021CW144222021_154555.pdf

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