ECL Blocking Beyond ₹1 Crore by Deputy Commissioner Held Invalid by Allahabad HC.

ECL Blocking Beyond ₹1 Crore by Deputy Commissioner Held Invalid by Allahabad HC.

Issue

Whether an order passed by a Deputy Commissioner to block an amount in the Electronic Credit Ledger (ECL) under GST law is legally valid if the blocked amount exceeds the officer’s prescribed pecuniary jurisdiction.

Facts

• A Deputy Commissioner of GST blocked the petitioner’s Electronic Credit Ledger (ECL) for an amount of ₹5,09,48,306 under Rule 86A of the UPGST Rules.
• As per established statutory guidelines, a Deputy Commissioner is only authorized to block credit in cases involving amounts up to a maximum of ₹1 crore.
• Jurisdiction for blocking amounts exceeding ₹1 crore lies with higher-ranking officers, such as a Joint Commissioner or an Additional Commissioner.
• The petitioner challenged the blocking order, arguing that it was passed without the necessary legal authority and was therefore invalid.

Decision

• The Allahabad High Court ruled that the Deputy Commissioner’s order was partly without jurisdiction.
• The court held that the order to block the ECL was legally valid only up to the officer’s pecuniary limit of ₹1 crore.
• It quashed the order to the extent it exceeded this limit, thereby directing that the balance amount (over ₹1 crore) be unblocked and made available for the taxpayer to utilize.
• The court also permitted the petitioner to formally apply for the unblocking of the entire amount, and directed the officer to pass a reasoned order on such an application.

Key Takeaways

• Pecuniary Jurisdiction is Non-Negotiable: Tax officers must operate strictly within the monetary limits assigned to their rank. Any action taken in excess of this jurisdiction is illegal and can be set aside.
• Partial Invalidity: An order passed in excess of jurisdiction is not necessarily void in its entirety. Courts can modify such orders, upholding them to the extent of the officer’s legitimate authority while striking down the excess.
• Drastic Power Requires Strict Compliance: Blocking the ECL is a drastic measure. The procedural and jurisdictional safeguards provided in the law, including monetary limits for officers, must be scrupulously followed.
• Taxpayer’s Right to Challenge: Taxpayers have a clear legal right to challenge any order that is passed by an officer who lacks the proper jurisdiction, ensuring a check on the arbitrary exercise of power.