Shree Salasar Metals Vs Union of India And 2 Others (Allahabad High Court)
The Allahabad High Court adjudicated a writ petition challenging an order passed under Rule 86A(1) of the CGST Rules, 2017, whereby the petitioner’s Input Tax Credit (ITC) amounting to Rs. 2,68,416/- was blocked in its Electronic Credit Ledger.
The petitioner contended that the action was without jurisdiction, as the authority had failed to record any “reason to believe,” which is a mandatory statutory requirement under Rule 86A. It was argued that no tangible material existed to suggest that the ITC had been fraudulently availed or was otherwise ineligible. The only recorded basis for the action was a statement indicating that the order was passed “as per recommendation of Superintendent (AE), Mirzapur,” which, according to the petitioner, reflected absence of independent application of mind.
The revenue authorities relied on an intelligence report and subsequent investigation conducted against one of the petitioner’s suppliers. Based on these findings, an alert circular dated 11.02.2026 was issued, identifying entities that may have received supplies from the said supplier. The authorities argued that the ITC blocking was justified on the basis of such information.
The Court examined the requirement of “reason to believe” and referred to judicial precedents emphasizing that such reasons must be recorded in writing and must have a rational nexus with relevant material. It reiterated that the existence of such belief is a jurisdictional prerequisite and must be based on objective grounds, not on arbitrary, vague, or irrelevant considerations.
