Peersaly Mohamed Yousuff Vs The Assistant Commissioner (ST) (RAL) (Madras High Court)
Summary: The Madras High Court considered a writ petition filed by Mr.Peersaly Mohamed Yousuff, proprietor of Tvl. Al-Madhina Steel Traders, challenging the intimation dated 05.05.2026 by which the petitioner’s Electronic Credit Ledger was blocked in relation to Input Tax Credit arising from supplies from Vasanth Enterprises. The blocked credit amounted to Rs.26,60,554/-, comprising CGST of Rs.13,30,277/- and SGST of Rs.13,30,277/-, under reference No. BL3305260000063. The petitioner stated that orders dated 08.06.2026 had subsequently been issued in proceedings concerning alleged wrongful availment of ITC and that appeals had been filed against those orders after making the prescribed pre-deposits from the electronic cash ledger.
Relying on the effect of the statutory appeal under Section 107 and on the judgment in Arise Steels Private Limited v. Assistant Commissioner (ST), the petitioner contended that the electronic credit ledger was liable to be unblocked. The Court explained that blocking of credit is governed by Rule 86A of the applicable GST Rules and that Rule 86A requires reasons to be recorded. It also observed that blocking is a provisional measure whose life cannot exceed one year. The Court distinguished the effect of an appeal and pre-deposit from the continuing operation of a Rule 86A blocking order: under Section 107(7), recovery proceedings for the balance amount are deemed to be stayed after the requisite pre-deposit, but the appeal and deemed stay do not, by themselves, invalidate or terminate the Rule 86A blocking order.
At the same time, Rule 86A enables the concerned person to seek unblocking, and the petitioner had submitted such a representation on 17.06.2026. Rather than directing automatic unblocking, the Court disposed of the writ petition by directing the respondents to consider the petitioner’s request for unblocking. If the request is accepted, the Court held that a speaking order is unnecessary; if it is rejected, a speaking order of refusal must be issued within one month from receipt of a copy of the Court’s order. The writ petition was thus disposed of with a procedural direction to decide the pending unblocking request, without the Court holding that the filing of an appeal and payment of pre-deposit itself required immediate unblocking. There was no order as to costs.
Cases Discussed
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Intimation dated 05.05.2026 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.
