Case Of: Arise Steels Pvt Ltd
Issued By: Madras High Court
Order No: W.P(MD) Nos.18606 and 18607 of 2025
Date: 9th July 2025
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GST ITC Blockage Cannot Continue Once Appeal Is Filed with Statutory Pre-Deposit
Tax authorities blocked ITC of the petitioner, Arise Steels Pvt. Ltd., amounting to ₹3.20 Cr (CGST ₹1.64 Cr, SGST ₹1.55 Cr) under Rule 86A of the CGST Rules, vide communications dated 22.05.2025 and 27.11.2024.
The blockage was linked to assessment orders passed for FY 2022-23 and 2023-24, wherein tax demand was confirmed.
Against these orders, the petitioner filed an appeal on 12.05.2025 under Section 107 of the GST enactments, after depositing 10% of the disputed tax as required.
The Department argued that the ITC restrictions must remain for a full year under Rule 86A(3), notwithstanding the filing of appeal and pre-deposit.
The Madras High Court examined its earlier decision in New Royal Traders v. Assistant Commissioner (2023), where it was held that upon filing appeal and making 10% pre-deposit, ITC blockage under Rule 86A loses effect.
The Court observed that the present case was materially similar, and no contrary rulings were brought to its notice.
It reiterated that the purpose of Rule 86A is defeated if ITC continues to remain blocked even after the statutory remedy of appeal is exercised with pre-deposit.
Accordingly, the respondents were directed to unblock the ITC amounts that had been frozen on 22.05.2025 and 27.11.2024.