Patna HC Directs Fresh Review of ₹72 Lakh ITC Blocked Under Rule 86A

Vatsamitra Infrastructure Private Limited Vs State of Bihar (Patna High Court)

Summary: The Patna High Court considered a writ petition filed by Vatsamitra Infrastructure Private Limited challenging the order dated 26.12.2025 passed by respondent no. 2, whereby an amount of Rs. 72 lakhs was debited/blocked in the petitioner’s Electronic Credit Ledger (ECL), resulting in blocking of input tax credit and recovery of tax from the Electronic Credit Ledger under Rule 86A of the GST Rules. The stated basis for the action was that invoices purportedly issued by M/s Pennant Construction Private Limited were found upon investigation to relate to a non-existent entity.

The petitioner contended that the ITC standing to its credit in the Electronic Credit Ledger was genuine and that the respondent authority had arbitrarily blocked and debited ITC amounting to Rs. 72 lakhs. The petitioner relied upon an earlier order of a Coordinate Bench of the Patna High Court in CWJC No. 4506 of 2025 dated 23.04.2025, which dealt with the guidelines issued by the Central Board of Indirect Taxes and Customs, particularly paragraph 3.4 concerning the circumstances in which disallowed or restricted credit may be allowed to be debited again.

The Court reproduced paragraph 3.4 of the guidelines, under which the Commissioner or authorised officer may examine the matter afresh, either on his own or on the basis of submissions and material evidence furnished by the taxpayer, and may allow use of the restricted credit to the extent of eligibility where the credit is no longer considered ineligible or wrongly availed.