Shah Associates Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court)
SEO Title: Karnataka HC: Rule 86A ITC Blocking Continues Pending Fresh Opportunity to Establish Genuine Transactions
Summary: Karnataka High Court partly allowed Shah Associates’ writ petition concerning blocking of Input Tax Credit under Rule 86A of the CGST/KGST Rules, 2017, giving the petitioner an opportunity to produce documents establishing the genuineness of transactions but declining to automatically unblock the ITC. Shah Associates, a proprietary concern engaged in the business of cement and iron, challenged the order dated 23.02.2026 by which ITC in its Electronic Credit Ledger had been blocked. The writ petition sought, inter alia, unblocking of ITC amounting to Rs.16,45,594/-, comprising Rs.8,22,797/- CGST and Rs.8,22,797/- KGST. The petitioner argued that it had not received a reasonable pre-decisional opportunity to show cause.
The High Court rejected the factual basis of the petitioner’s contention that no opportunity had been extended before blocking the credit. The State produced an intimation of personal hearing dated 30.01.2026 together with a postal acknowledgement signed on behalf of the petitioner. The Court held that these documents completely undermined the contention that an opportunity had not been provided. The blocking action was based on the allegation that ITC had been claimed solely on documents received from certain fictitious entities and that blocking was necessary to secure revenue and prevent violation.
