Supreme Court Dismisses DGGI’s SLP in ECrL Negative Blocking Case, Upholds Delhi HC Ruling
The Supreme Court has dismissed the Special Leave Petition (SLP) filed by the Directorate General of GTS Intelligence (DGGI) challenging the Delhi High Court’s decision that set aside the negative blocking of a taxpayer’s Electronic Credit Ledger (ECrL) under Rule 86A of the CGST Rules.
The bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan held that there was no case for interference under Article 136 of the Constitution of India and accordingly dismissed the petition.
The case stemmed from a dispute involving a manufacturer and exporter of specialty chemicals, who was eligible for IGST refunds under Section 16(3)(b) of the IGST Act and exempted from IGST on imports via Notification No. 79/2017-Cus. However, Rule 96(10) of the CGST Rules and Notification No. 54/2018-CT denied rebate benefits on input taxes when such exemptions were claimed.
Facing a refund denial and a show-cause notice demanding recovery of IGST rebate with interest and penalty, the petitioner reversed Input Tax Credit (ITC) worth ₹3.36 crore under protest and deposited the same as pre-deposit using the Electronic Credit Ledger through Form GST DRC-03 while appealing to the Commissioner (Appeals).
The Revenue, however, issued a letter on April 25, 2023, instructing that the pre-deposit had to be made exclusively via the Electronic Cash Ledger. Challenging this direction as arbitrary and violative of Article 14 of the Constitution, the petitioner approached the Delhi High Court under Article 226.
In its judgment, the High Court not only quashed the negative blocking of the ECrL under Rule 86A but also referred to the Best Crop Science Ltd ruling, which clarified that past fraudulent availment of ITC does not warrant future replenishment of the credit ledger under Rule 86A(1).
The Revenue subsequently moved the Supreme Court, but the apex court refused to entertain the SLP, reinforcing the High Court’s view that taxpayers cannot be compelled to make pre-deposits solely through the cash ledger and affirming that arbitrary restrictions on credit ledger utilization violate constitutional protections.
Case Details
Case Title: DGGI Versus Super Products
Case No.: Special Leave Petition (Civil) Diary No(S). 21064/2025
Date: 19-05-2025
Counsel For Petitioner: N. Venkataraman, A.S.G. Gurmeet Singh Makker, AOR Mr. V C Bharathi, Adv. Mr. Sarthak Karol, Adv. Mr. Udai Khanna, Adv.
Counsel For Respondent: None
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
