K.K. Alloys Vs Union of India And Ors. (Punjab And Haryana High Court)
The Punjab and Haryana High Court considered a writ petition challenging the action of the GST authorities in blocking the petitioner’s Electronic Credit Ledger (ECL) by creating a negative balance through entries dated 27.08.2025 and 29.08.2025. The petitioner limited its challenge to the legality of the negative blocking of Input Tax Credit (ITC), contending that such action violated Rule 86A of the CGST Rules, 2017 and the principles of natural justice. The principal question before the Court was whether Rule 86A permits the Commissioner or an authorized officer to block a taxpayer’s Electronic Credit Ledger by an amount exceeding the credit available in the ledger at the time the order is issued.
Read SC Judgment in this case: No Negative Blocking of Electronic Credit Ledger Under Rule 86A: SC
The petitioner submitted that it is a registered business under the CGST Act and that the authorities had blocked ITC amounting to Rs. 11,60,24,263 and Rs. 3,19,214 by creating a negative balance in its Electronic Credit Ledger. According to the petitioner, Rule 86A authorizes blocking only of ITC actually available in the ledger and does not permit the creation of an artificial negative balance that prevents utilization of future credits. It relied on several judgments of the Gujarat and Delhi High Courts, as well as an earlier Punjab and Haryana High Court decision in M/s Shyam Sunder Strips, which had taken the same view.
