Kalaimahal Cements Private Limited Vs Commercial Tax Officer (Madras High Court)
The Madras High Court recently delivered an important ruling on blocking of Input Tax Credit (ITC) under Rule 86A of the CGST Rules. The Court dismissed the writ petition filed by the taxpayer and upheld the department’s action of blocking ITC where fraudulent availment of credit was suspected.
This decision reiterates that Rule 86A is a powerful anti-evasion tool available to tax authorities when there is credible evidence suggesting fraudulent ITC claims.
Background of the Case
The petitioner challenged the blocking of ITC in the Electronic Credit Ledger for the period October 2025 to December 2025.
The action of the department was based on the following facts:
- An inspection was conducted on 04.12.2025.
- During the inspection, the Managing Director admitted that ITC had been availed on blocked invoices.
- Based on this admission and inspection findings, the department blocked ITC on 05.12.2025 under Rule 86A.
The taxpayer challenged this action before the High Court.
Key Arguments Raised by the Taxpayer
The petitioner mainly raised two arguments:
1. Blocking of ITC was unjustified on merits.
2. Only an Assistant Commissioner or higher officer is authorized to block ITC under Rule 86A, whereas the action was taken by a State Tax Officer.
Court’s Observations
The Madras High Court rejected the petitioner’s arguments and held:
1. Admission of fraudulent ITC weakens the challenge
The Court observed that the Managing Director had admitted availing ITC on blocked invoices. Therefore, the challenge to the blocking action could not be sustained.
2. State Tax Officer can block ITC with proper authorization
The Court relied on an earlier ruling of the Madurai Bench, which clarified that:
