Syed Ahamed Ibrahim Vs Assistant Commissioner (ST) (RAL) (FAC) (Madras High Court)
Summary: Madras High Court held that filing a GST appeal and making the prescribed pre-deposit does not, by itself, nullify an order blocking Input Tax Credit under Rule 86A of the GST Rules. The petitioner challenged the blocking of ITC of Rs. 28,15,364/- in its Electronic Credit Ledger in relation to supplies from Vasanth Enterprises. It was contended that subsequent orders concerning alleged wrongful availment of ITC had been appealed against after making pre-deposits from the electronic cash ledger and, therefore, recovery stood stayed under Section 107 of the applicable GST enactments.
The Court observed that Rule 86A requires reasons to be recorded for blocking credit and that such blocking is a provisional measure whose life cannot exceed one year. It clarified that the consequence of filing an appeal and making the pre-deposit is that recovery proceedings for the balance amount are deemed to be stayed under Section 107(7), with no appropriation permissible from either the electronic cash ledger or blocked electronic credit ledger.
However, the appeal and deemed stay have no further impact on the subsisting Rule 86A blocking order. Since Rule 86A permits the person concerned to seek unblocking and the petitioner had submitted a representation dated 17.06.2026, the Court directed the respondents to consider that request. If accepted, no speaking order was necessary; if rejected, a speaking order of refusal was required within one month from receipt of the Court’s order.
Cases Discussed
- Arise Steels Private Limited v. Assistant Commissioner (ST), (2025) 32 Centax 444 (Mad.) — Relied upon by the petitioner in support of the contention that the Electronic Credit Ledger was liable to be unblocked after filing the appeal and making the pre-deposit. The Court, however, clarified the limited effect of the statutory appeal and deemed stay on a Rule 86A blocking order.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Intimation dated 07.05.2026 blocking the electronic credit ledger of the petitioner with regard to credit relating to supplies from Vasanth Enterprises is challenged in this writ petition.
2. Learned counsel for the petitioner submits that orders dated 08.06.2026 were issued after initiating proceedings against the petitioner in respect of the alleged wrongful availment of Input Tax Credit (ITC). He adds that appeals were lodged against said orders by making pre-deposits from the electronic cash ledger of the petitioner. On account of making such pre-deposit, learned counsel submits that there is an interim stay under Section 107 of applicable GST enactments. Consequently, it is contended that the electronic credit ledger is liable to the unblocked. Learned counsel relies upon the judgment of this Court in Arise Steels Private Limited v. Assistant Commissioner (ST), (2025) 32 Centax 444 (Mad.).
3. An order to block credit is issued under Rule 86A of applicable Rules under GST law. Rule 86A requires that reasons be recorded in support of such order. Being a provisional measure, the life of a blocking order shall not exceed one year. Consequence of filing an appeal and making the pre-deposit is that recovery proceedings for the balance amount shall be deemed to be stayed in terms of sub-section (7) of Section 107. Therefore, the effect of making the pre-deposit is that no appropriation shall be made either from the electronic cash ledger or the blocked electronic credit ledger. Beyond that, the lodging of an appeal and the deemed stay would have no impact on the blocking order under Rule 86A. Rule 86A, however, enables the person concerned to apply for unblocking. The petitioner has submitted a representation on 17.06.2026 seeking such unblocking.
4. For reasons aforesaid, this writ petition is disposed of by directing the respondents to consider the petitioner’s request for unblocking. If such request were to be accepted, it is not necessary to issue a speaking order. On the other hand, if the request were to be rejected, a speaking order of refusal shall be issued within one month from the date of receipt of a copy of this order. There will be no order as to costs.
