Rule 86A credit blocking may continue subject to prompt post-decisional hearing and reasoned determination.

The petitioner challenged the action of the CGST/WBGST authorities in blocking ₹4,43,53,116 in its Electronic Credit Ledger under Rule 86A of the CGST/WBGST Rules, 2017, for the financial years 2021–22 to 2023–24 and the tax period 1 February 2026 to 17 June 2026.

The blocking order dated 15 June 2026 was based on the authorities’ prima facie belief that certain suppliers were non-existent and that the petitioner had availed ineligible or fraudulent input tax credit.

The petitioner contended that its purchases were genuine and supported by documentary evidence, and that the blocking was effected without notice or a pre-decisional hearing.

After the petitioner’s email requesting review and unblocking of the credit, the authorities issued a notice under Section 70 of the WBGST Act, 2017, requiring production of documents concerning the relevant periods and suppliers.

The State opposed the writ petition as premature and maintained that the blocking order was validly made under Rule 86A to protect revenue.

Whether the blocking of the petitioner’s Electronic Credit Ledger under Rule 86A, without granting a pre-decisional opportunity of hearing, was arbitrary, illegal, or otherwise unsustainable.

Whether the petitioner was entitled to a post-decisional hearing and an opportunity to produce documents substantiating the genuineness of its purchases and the eligibility of the input tax credit.

Whether the writ petition was premature in view of the pending verification and proceedings initiated by the GST authorities.

The Court applied Rule 86A of the CGST/WBGST Rules, 2017, which empowers the Commissioner or authorised officer to restrict or block utilisation of the Electronic Credit Ledger where there are “reasons to believe” that the input tax credit has been fraudulently availed or is otherwise ineligible.

The Court also applied the principles of natural justice, particularly audi alteram partem, in relation to administrative action causing serious civil consequences.

It relied on K-9 Enterprises v. State of Karnataka, (2024) 23 Centax 300 (Kar.), affirmed in State of Karnataka v. K-9 Enterprises, (2025) 30 Centax 281 (S.C.), where the courts held that, ordinarily, a pre-decisional hearing should be granted before blocking an Electronic Credit Ledger under Rule 86A, absent extraordinary or exceptional circumstances.

The Court further relied on the statutory power to summon and require production of documents under Section 70 of the WBGST Act, 2017, as invoked by the authorities.

The Court found that the records prima facie disclosed reasons to believe that the relevant suppliers were non-existent at their declared premises and that their registrations had been cancelled; consequently, it found no prima facie infirmity in the authorities’ decision to block the Electronic Credit Ledger under Rule 86A.

Although the petitioner relied on K-9 Enterprises to challenge the absence of a pre-decisional hearing, the Court balanced the competing interests by directing a meaningful post-decisional hearing.

It permitted the petitioner to produce all relevant GST and transactional documents to establish the genuineness of the suppliers, purchases, and claimed credit, and required the competent authority to decide the representation by a reasoned and speaking order after granting a personal hearing.

The Court expressly refrained from deciding the merits of the petitioner’s entitlement to input tax credit.

However, it directed the petitioner to submit a comprehensive representation with supporting documents within two weeks and directed Respondent No. 2 to provide a personal hearing and pass a reasoned and speaking order within three weeks thereafter, with communication of the decision within one week.

The entire exercise was directed to be completed by 15 October 2026.

The writ petition was disposed of without adjudicating the merits of the petitioner’s claim.