MP HC Leaves ₹23.78 Lakh GST Credit Block In Place, Says Aluminium Firm Can Appeal ₹1.78 Crore ITC Demand

The petitioner, a registered aluminium-products business, challenged the State GST authorities’ decision dated 10 March 2026 to block ₹23,78,030 in its Electronic Credit Ledger (ECL) under Rule 86A.

The petitioner had earlier responded to departmental summons and supplied invoices, e-way bills, bank statements and other records; it also relied on Central GST proceedings involving examination of its stock and books of account.

The State authorities said the ECL block was based on an Anti-Evasion Bureau investigation into alleged bogus ITC passed through three suppliers.

A subsequent show-cause notice proposed a demand of ₹1,78,66,416, and an order dated 28 September 2026 confirmed that demand after finding the suppliers’ transactions fictitious and the petitioner’s ITC inadmissible.

The petitioner amended its writ petition to challenge that order as well.

Section 6 of the MPGST Act bars parallel proceedings only where they concern the same subject matter; it does not preclude proceedings based on a distinct transaction and cause of action.

Rule 86A permits the proper officer to restrict use of credit in the ECL where the officer has reason to believe that ITC was fraudulently availed or is otherwise ineligible.

Under Sections 16(2)(b) and 16(2)(c) of the CGST/MPGST Acts, entitlement to ITC requires, among other things, actual receipt of goods and payment of the tax to the Government.

The Court also considered the demand and penalty provisions invoked under Sections 74A(5)(ii), 50 and 122.

In exercising Article 226 jurisdiction, the Court may decline intervention where the dispute requires examination of facts and a statutory appellate remedy is available.

The Court treated the State proceedings as concerning alleged fraudulent ITC transactions distinct from the subject matter of the earlier Central GST proceedings, and therefore held that Section 6 did not bar them.

It accepted that the ECL restriction was based on the Anti-Evasion Bureau’s investigation report, which supplied the basis for the authority’s belief under Rule 86A.

The later adjudication order recorded findings that the suppliers were non-genuine, that goods had not actually been received or supplied, and that the required tax had not been paid; on those findings, the statutory conditions for ITC were not met.

Because the challenge to the demand involved disputed factual questions and a statutory appeal was available, the Court declined to determine those matters under Article 226.

It left the petitioner to pursue the available statutory remedy, clarifying that its observations were confined to deciding the writ petition and were not to be treated as findings on the merits in the statutory proceedings.