Gurasees Sales Corporation Vs Union of India And Others (Punjab And Haryana High Court)
The Punjab and Haryana High Court considered a writ petition limited to the legality of actions taken by the tax authorities in blocking the petitioner’s Electronic Credit Ledger (ECL) under Rule 86A of the Central Goods and Services Tax Rules, 2017. The petitioner challenged the entries dated 09.05.2025 and 29.08.2025, through which Input Tax Credit (ITC) was blocked in such a manner that the ECL reflected a negative balance. The petitioner contended that this action violated Rule 86A of the CGST/PGST framework and the principles of natural justice, as the rule does not authorize blocking of ITC beyond the credit actually available in the ledger at the relevant time.
Both parties agreed that the sole question for determination was whether Rule 86A permits the Commissioner or an authorized officer to block a taxpayer’s ECL by an amount exceeding the ITC available at the time of issuing the order. In view of this limited legal issue, the Court proceeded without requiring a formal reply from the respondents.
The petitioner argued that it was a duly registered and active business entity and that the respondents had blocked ITC without prior notice, resulting in an artificial negative balance that disabled the petitioner from utilizing valid ITC for discharging tax liabilities. It was asserted that the power under Rule 86A is confined strictly to the ITC available in the ECL and does not extend to creating a negative balance. Reliance was placed on several High Court decisions, particularly those of the Gujarat and Delhi High Courts, which had consistently held that Rule 86A presupposes the existence of available credit and does not authorize negative blocking. It was also pointed out that similar views taken by the Delhi High Court had been upheld by the Supreme Court through dismissal of special leave petitions. Further, the petitioner relied on a prior decision of the Punjab and Haryana High Court dated 04.11.2025, which had endorsed the same interpretation.
