Blocked ITC cannot automatically satisfy Appeal Pre-Deposit
Delhi High Court in the matter of Spherion Solutions Private Limited vs. Additional Commissioner, has held that ITC blocked under Rule 86A cannot be treated as payment of the mandatory 10% pre-deposit under Section 107(6) of the CGST Act, 2017, since blocking merely restricts utilisation and does not amount to actual payment or appropriation towards the demand. The Court clarified that while ITC otherwise available in the Electronic Credit Ledger may be used for the pre-deposit, credit under a subsisting Rule 86A restriction cannot be utilised unless the restriction is removed or suitably modified. However, recognising that an erroneous DRC-07 had delayed the taxpayer’s appeal, the Court allowed the taxpayer four weeks to file the appeal without limitation being a bar and directed that no coercive recovery be undertaken during this period.