Case Law Details
Shreyash Retail Private Limited Vs Assistant Commissioner of State Tax And Another (Punjab And Haryana High Court)
Punjab and Haryana High Court Orders Release of Blocked ITC Because No Rule 86A Order Was Passed; Blocked GST ITC Held Illegal Due to Absence of Recorded Reasons Under Rule 86A; High Court Sets Aside ITC Blocking After Finding No Prior Order by Competent Authority; GST Authorities Cannot Block ITC Without Following Rule 86A Procedure; ITC Blocking Through Email Quashed Because Statutory Safeguards Were Not Followed.
The Punjab and Haryana High Court considered a petition challenging the blocking of the petitioner’s input tax credit (ITC) through an email dated 13.01.2026. The petitioner contended that the ITC had been blocked without passing any order. The Court examined Rule 86A of the Central Goods and Services Tax Rules, 2017, which permits the Commissioner or an authorized officer not below the rank of Assistant Commissioner to block ITC available in an assessee’s electronic credit ledger only when there are reasons to believe that such ITC has been fraudulently availed or is otherwise ineligible. The Court noted that it was undisputed that no order had been passed by the competent authority before blocking the petitioner’s ITC and no reasons had been recorded for such action. Holding that the blocking of ITC without compliance with Rule 86A contravened the statutory provisions, the Court declared the action illegal and directed release of the blocked ITC. However, the respondents were granted liberty to initiate fresh proceedings against the petitioner in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
This petition is directed against the blocking of the petitioner’s input tax credit conveyed to the petitioner through email dated 13.01.2026 (Annexure P-1) on the ground that the petitioner’s input tax credit has been blocked without passing any order.
2. Learned counsel for the parties have been heard.
3. Rule 86A of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as ‘the Rules’) clearly provides that the Commissioner or an officer authorized by him in this regard, not below the rank of Assistant Commissioner, can block an assessee’s ITC available in the assessee’s electronic credit ledger but only when such officer has reasons to believe that the ITC available in the assessee’s electronic credit ledger has been fraudulently availed by the assessee or that the assessee is ineligible to avail the ITC existing in its electronic credit ledger.
4. It is not disputed that prior to blocking of the petitioner’s ITC existing in its electronic credit ledger, no order was passed by the competent authority recording therein the reasons as to why he believed that the petitioner’s ITC, existing in its electronic credit ledger, should be blocked. Thus, the impugned blocking of the petitioner’s ITC contravenes Rule 86-A of the Rules. Therefore, we unhesitantly hold that the blocking the petitioner’s ITC, existing in its electronic credit ledger is illegal and order its release. However, the respondents would be at liberty to proceed afresh against the petitioner in accordance with law.
5. Disposed of.
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