Court Directs Rectification of Erroneous GST DRC-07, Denies Use of Blocked Input Tax Credit for Pre-Deposit, and Provides Relief for Filing Appeal Amid Portal Difficulties
In a significant judgment delivered on September 3, 2026, the Delhi High Court (Division Bench comprising Justices Anil Kshetarpal and Shail Jain) addressed the complex issues arising from a Goods and Services Tax (GST) dispute involving Spherion Solutions Private Limited and the Additional Commissioner of Adjudication, CGST Delhi North. The case highlights procedural intricacies in GST appeal filings, rectification of tax demand forms, and the contentious use of blocked input tax credit against mandatory pre-deposit requirements under the CGST Act, 2017.
The petitioner, Spherion Solutions Pvt. Ltd., faced a confirmed Integrated GST demand totaling ₹33,32,568 for the financial years 2020-21 and 2021-22, arising from an investigation by the Directorate General of GST Intelligence (DGGI), which alleged wrongful availing of input tax credit through transactions with a non-genuine supplier. The adjudicating authority imposed an equivalent penalty, doubling the total liability reflected in the summary order uploaded on the GST portal as FORM GST DRC-07.
However, the petitioner encountered a technical error when attempting to file an appeal. The erroneous form amalgamated the tax demand and penalty into a single figure of ₹66,65,136 under the "penalty" head and incorrectly referenced the financial year 2018-19 instead of the relevant years. Consequently, the portal calculated the mandatory pre-deposit amount as ₹6,66,514 (10% of the inflated figure), double the actual amount of ₹3,33,257 (10% of the tax demand).
Despite multiple attempts, the petitioner could not rectify the form or file the appeal electronically due to portal technical glitches. The petitioner also sought to appropriate ₹3,33,257 from the blocked input tax credit held under Rule 86A of the CGST Rules, arguing that blocked credits exceeding the pre-deposit amount should be allowed for pre-deposit payment to avoid cash payment and double burden.
The Court noted that while the error in FORM GST DRC-07 was eventually rectified by the Additional Commissioner using powers under Section 161 of the CGST Act, the blocked credits could not be appropriated towards the mandatory pre-deposit. The Court clarified that Rule 86A restrictions on input tax credit are preventive measures imposed when there is a reason to believe that the credit was fraudulently availed or is inadmissible. Such blocked credits cannot be treated as payment or satisfaction of pre-deposit obligations unless the competent authority removes or modifies the restrictions.
Further, the Court observed that the restrictions currently blocking ₹17,96,088 of input tax credit were imposed by an Excise and Taxation Officer of the State of Haryana, who was not party to the present proceedings. Since the Court lacked jurisdiction over the officer who imposed the restrictions, it could not order appropriation of the blocked credits.
Importantly, the Court granted the petitioner liberty to file the statutory appeal against the Order-in-Original within four weeks from the date of judgment, emphasizing that the appeal should not be rejected solely on grounds of limitation caused by the delay in rectifying FORM GST DRC-07. The Court also directed the respondents to provide all necessary assistance to the petitioner for electronic filing of the appeal and permitted manual filing if technical difficulties persisted. Additionally, the Court stayed coercive recovery actions for four weeks, allowing the petitioner time to comply with pre-deposit requirements.
In conclusion, the Delhi High Court balanced procedural fairness with statutory compliance, allowing the petitioner to pursue appellate remedies while affirming the sanctity of restrictions under Rule 86A. The judgment underscores the importance of accuracy in GST demand forms, clarifies the limited scope of blocked input tax credit use, and provides practical relief for taxpayers facing technical challenges in appeal filings.
Bottom Line:
Goods and Services Tax (GST) - Rectification of erroneous FORM GST DRC-07 - Mandatory pre-deposit under Section 107(6) of CGST Act, 2017 - Utilisation of blocked input tax credit under Rule 86A of CGST Rules - Relief sought by petitioner for appropriation of blocked credit towards pre-deposit cannot be granted in absence of competent authority's involvement - Petitioner granted liberty to file statutory Appeal with directions for assistance in case of technical difficulties.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Section 107(6), Section 49(4), Section 161; Central Goods and Services Tax Rules, 2017 Rule 86A
