Re-Blocking Input-Tax Credit Beyond One Year Without New Material Is Unsustainable: Punjab & Haryana High Court

Holding that the tax authorities cannot indefinitely freeze Input Tax Credit (ITC) by repeatedly invoking the same allegations, the Punjab & Haryana High Court has ruled that blocking ITC beyond the statutory one-year period—without any fresh material or further proceedings—is “clearly unsustainable.”

Justice Lisa Gill and Justice Pramod Goyal said, "However, a bare perusal of Section 83 of 2017 Act and Rule 86A of 2017 Rules clearly indicate that basic principle behind both provisions is protection of revenue. Rule 83(2) and Rule 86A(3) are clearly pari materia. Rule 159 (5) and (6) of 2017 Rules confer powers upon the Commissioner to release the property from attachment when it is found that property attached was or is not liable to attachment as is the case under Rule 86A(2) of 2017 Rules."

It added that, blocking of ITC beyond period of one year on the same very ground, is clearly unsustainable. It is to be reiterated that as informed to the Court, no further proceedings have been initiated against petitioner and there is no other fresh ground on the basis of which blocking of ITC has been renewed.

The petitioner—engaged in manufacturing brass/copper sheets and utensils—challenged the repeated blocking of its ITC on the ground that no investigation or opportunity of hearing preceded the initial action.

It was submitted that the firm's ITC was first blocked on 21.11.2023, allegedly due to its supplier, M/s M.S. Trading Company, being found non-existent. Though the department partially unblocked ₹27,48,835 on 16.02.2024 upon representation, the remaining ITC remained frozen.

The petitioner argued that the re-blocking done again on 05.12.2023, on identical grounds and without fresh material, violated Rule 86A(3), which mandates that such restrictions “shall cease to have effect” after one year. Reliance was placed on the Supreme Court judgment in Kesari Nandan Mobile v. ACST (2) (2025), where the Court held that even provisional attachments under Section 83 of the CGST Act cannot be renewed once they lapse after one year.

The State, however, contended that the petitioner had availed fraudulent ITC on bogus invoices and that Rule 86A does not bar re-blocking.

After hearing the submissions, the Court rejected the State's stand, emphasising that Rule 86A(3) of the 2017 Rules and Section 83(2) of the CGST Act are pari materia, both intended solely to protect revenue for a limited period.

The Supreme Court's reasoning in Kesari Nandan Mobile—that the revenue cannot indirectly renew a provisional attachment absent statutory authority—applies equally to re-blocking of ITC, it opined.

Repeated blocking on the same grounds, with no fresh material or further proceedings against the petitioner, amounts to circumventing the statutory limit.

“An act which cannot be done directly cannot be done indirectly,” the Court observed, referring to the Supreme Court.

Highlighting that, one-year period from 21.11.2023 had expired and no new circumstances were shown, the Court held the continued blocking unsustainable and illegal.

Mr. Aman Bansal, Advocate and Mr. Bharat Jain, Advocate for the petitioner.

Mr. Sourabh Goel, Senior Standing Counsel for the respondents.

Title: NB INTERNATIONAL v. COMMISSIONER, CENTRAL GOODS AND SERVICES TAX AND OTHERS

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