HC Quashes ECL Blocking Without Prior Notice Under Rule 86A

Case Details: Suf Enterprises vs. Assistant Commissioner of Central Tax - [2026] 185 taxmann.com 981 (Karnataka)

Judiciary and Counsel Details

S Sunil Dutt Yadav, J.
Bhagavath P., Adv. for the Petitioner.
Akash B. Shetty, Adv. for the Respondent.

Facts of the Case

The petitioner filed a writ petition challenging the blocking of its electronic credit ledger (ECL) under Rule 86A of the CGST Rules. The Department had blocked the ECL on the ground that input tax credit (ITC) was availed without receipt of goods or services, and that the supplier was found to be non-functioning. The petitioner contended that such blocking was carried out without issuing any pre-decisional notice or granting an opportunity of hearing, as required under Rule 86A. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the blocking of the ECL was unsustainable in law in view of non-compliance with Rule 86A of the CGST Rules read with Section 49 of the CGST Act, particularly the absence of a pre-decisional notice or hearing. It was observed that Rule 86A, being a restrictive provision affecting vested credit, must be strictly complied with, including adherence to procedural safeguards. Accordingly, the Court held that the impugned blocking order was liable to be set aside and directed the Department to immediately unblock the ECL to enable the petitioner to file returns. It further granted the Department the liberty to initiate fresh proceedings in accordance with law, while keeping all contentions open for adjudication in appropriate proceedings.