Mannat Steels Vs Union of India And Another (Punjab and Haryana High Court)
The present writ petition challenges the action of the respondents in blocking the petitioner’s Electronic Credit Ledger (ECL) and creating a negative entry dated 03.10.2025, which blocked Input Tax Credit (ITC) of Rs.8,00,164/-. The petitioner contended that such action violated Rule 86A of the Central Goods and Services Tax Rules, 2017 (CGST Rules) and the Punjab GST Rules, 2017, as well as principles of natural justice. The central legal question was whether Rule 86A permits the Commissioner or an authorized officer to block a taxpayer’s ECL by an amount exceeding the credit available at the time of the order.
The petitioner, a registered dealer under the CGST and PGST Acts, argued that Rule 86A does not authorize blocking ITC beyond the balance available in the ECL. The creation of a negative balance artificially restricts the taxpayer’s ability to utilize legitimately available ITC, leaving only the remaining credit, if any, for discharging tax liabilities. The petitioner emphasized that the power under Rule 86A is confined to the ITC available at the relevant time and cited multiple judgments in support, including Gujarat High Court in Samay Alloys India Pvt. Ltd. v. State of Gujarat (2022), and Delhi High Court in Best Crop Science Pvt. Ltd., Kings Security Guard Services Pvt. Ltd., and Karuna Rajendra Ringshia (2024), which have been upheld by the Supreme Court through SLP dismissals on 17.05.2025 and 09.07.2025. This High Court, in CWP-23675-2025 (M/s Shyam Sunder Strips v. Union of India, 04.11.2025), had also endorsed these views.
