In a recent order dated September 3, 2026, the Delhi High Court addressed a case involving Spherion Solutions Private Limited, which had been investigated for allegedly availing wrongful Input Tax Credit (ITC) based on invoices from Crimson International. The adjudicating authority confirmed a demand of ₹33,32,568, which was doubled due to a GST portal error, affecting the pre-deposit calculation for an appeal.
Read more: Allahabad High Court - Demand order cannot confirm tax and penalty demand higher than what was proposed in the show-cause notice [Order attached]
Spherion sought to use ₹3,33,257 from blocked ITC under Rule 86A as the mandatory pre-deposit required under Section 107(6) of the CGST Act. However, the Court ruled that blocked ITC does not count as payment or appropriation of the demand since it cannot be debited without lifting the restrictions imposed by Rule 86A.
The Court noted that the restrictions were imposed by Haryana authorities, who were not parties to the case, and their orders were not presented, preventing the Court from modifying the restrictions. Nonetheless, the Court recognized the taxpayer's predicament due to the portal error and allowed Spherion four weeks to file the appeal, permitting manual filing if necessary, and provided temporary protection from coercive recovery actions.
Order Date - 03 September 2026
Parties: Spherion Solutions Private Limited v. Additional Commissioner Adjudication CGST Delhi North & Ors.
Facts -
- Spherion Solutions Private Limited, a Haryana-registered taxpayer, was investigated by DGGI after allegedly receiving invoices from Crimson International, an entity suspected of issuing invoices without actual supply.
- DGGI alleged wrongful availment of ITC of ₹33,32,568 for FY 2020-21 and 2021-22. The adjudicating authority confirmed the demand along with interest and an equivalent penalty.
- The GST portal incorrectly reflected the combined tax and penalty of ₹66,65,136 as penalty, causing the appeal portal to calculate a pre-deposit of ₹6,66,514 instead of ₹3,33,257. The error was subsequently rectified on 16.03.2026.
- Meanwhile, ITC of ₹17,96,088 remained blocked under Rule 86A. The taxpayer sought permission to use ₹3,33,257 from this blocked credit as the mandatory appeal pre-deposit, while also seeking relief against the filing difficulty.
Issue -
- Whether ITC blocked under Rule 86A could be appropriated towards the 10% mandatory pre-deposit under Section 107(6) of the CGST Act?
Order -
- The Court noted that Section 107(6) requires payment of 10% of the disputed tax for filing an appeal, while Section 49(4) permits utilisation of ECL subject to statutory restrictions. Where Rule 86A is operating, the blocked credit cannot be debited unless the restriction is removed or modified.
- Mere blocking of ITC does not amount to payment or appropriation of the demand. Since the blocked amount had neither been debited nor appropriated in the OIO, it could not satisfy the mandatory pre-deposit requirement.
- The Court also found that the subsisting Rule 86A restrictions were imposed by Haryana authorities who were not parties to the writ petition. Further, the orders and reasons supporting those restrictions were not before the Court, preventing it from directing their modification
- Nevertheless, the taxpayer should not lose its statutory appeal because of the incorrect DRC-07 and resulting portal difficulties. The Court granted four weeks to file the appeal, allowed manual filing if the portal continued to block a compliant application, and granted four weeks' protection from coercive recovery.
