Madras HC Directs Consideration of GST ITC Unblocking Request Under Rule 86A

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.