Hemang Bipin Varaiya Vs State of Maharashtra & Ors. (Bombay High Court)
The Bombay High Court dealt with a writ petition under Article 226 challenging the blocking of Input Tax Credit (ITC) amounting to ₹1.42 crore by the tax authorities. The petitioner sought quashing of the action dated 24 July 2025 and a direction to unblock the ITC, alleging violation of principles of natural justice and non-compliance with Rule 86A of the Central Goods and Services Tax Rules, 2017.
A show cause notice was issued on 17 July 2025 asking why the ITC should not be blocked. However, before the petitioner could respond and before the notice was adjudicated, the authority proceeded to block the ITC on 24 July 2025. The petitioner contended that Rule 86A requires satisfaction of preconditions, including formation of “reasons to believe” that the ITC is fraudulently availed or ineligible, which was not done. It was also argued that no order had been passed on the show cause notice.
The petitioner relied on earlier judicial decisions stating that Rule 86A permits blocking only to the extent of credit available in the electronic credit ledger and not future or non-existent credit. It was further contended that the ledger had a negative balance, making the blocking action impermissible.
