Garg Furnace Limited Vs Union of India And Others (Punjab And Haryana High Court)
The writ petition before the Punjab and Haryana High Court was confined to the challenge against the action of the tax authorities in blocking the petitioner’s Electronic Credit Ledger (ECL) by creating a negative balance through an entry dated 01.10.2025. The petitioner contended that the blocking of Input Tax Credit (ITC) in excess of the credit actually available in the ECL was in violation of Rule 86A of the Central Goods and Services Tax Rules, 2017 and the Punjab GST Rules, 2017, as well as the principles of natural justice.
Both parties agreed that the sole legal issue for consideration was whether Rule 86A permits the Commissioner or an authorised officer to block a taxpayer’s ECL by an amount exceeding the ITC available at the time of passing the order. In view of this limited legal question, it was agreed that no formal reply from the respondents was necessary.
The petitioner submitted that it was a registered and active business entity and that on 01.10.2025, the authorities had blocked ITC in its ECL without prior notice, resulting in a negative balance. It was argued that Rule 86A only empowers authorities to restrict debit of ITC that is actually available in the ECL and does not authorise creation of an artificial negative balance. Such negative blocking, according to the petitioner, prevented utilisation of legitimately availed ITC for discharge of tax liability. Reliance was placed on decisions of the Gujarat High Court and Delhi High Court, which held that availability of ITC in the ECL is a condition precedent for invoking Rule 86A. It was further pointed out that similar views had been upheld by the Supreme Court through dismissal of special leave petitions. The petitioner also relied on an earlier decision of the same High Court dated 04.11.2025, which had endorsed this interpretation.
