The court emphasized that blocking an Electronic Credit Ledger under Rule 86A requires independent inquiry and valid reasons to believe that ITC is fraudulently availed, which were not present in this case.

ORDER :

S.R.KRISHNA KUMAR, J.

In this petition, the petitioner seeks the following reliefs:

“A. Declare that the Impugned blocking of the Petitioner's Electronic Credit Ledger on 11.09.2025 vide Reference No. BL2909250000217, insofar as it purports to restrict the utilization of Input Tax Credit beyond the available credit and creates a negative balance, is ultra vires Rule 86A of the CGST Rules, 2017 (Annexure -A) and (Annexure -Al);

B. Consequently, issue a writ of Mandamus or order or direction in the nature of Mandamus directing the Respondent No.3 to forthwith unblock and restore the Input Tax Credit wrongly debited to the extent of Rs. 13,08,003/- (Rupees Thirteen Lakh Eight Thousand and Three only) in Central tax and Rs. 13,08,003/- (Rupees Thirteen Lakhs Eight Thousand and Three only) in State tax totalling amounting to Rs. 26,16,006/- (Rupees Twenty-Six Lakh Sixteen Thousand and Six only). in the Petitioner's Electronic Credit Ledger and to permit the Petitioner to utilize the same for discharge of its lawful tax liabilities;

C. Consequently, liberty may be reserved to the Petitioner to appropriately agitate all rights and contentions in the event any Show Cause Notice is issued pursuant to, the present parallel summons proceedings issued by the Respondent No.2 under Section 70 of the CGST/SGST Act, 2017 dated 28.07.2025 bearing File No. GEXCOM/AE/INV/GST/7724/2025-AE-O/o Pr COMMR- CGST-Mysuru and CBIC-DIN-20250757YY00009429A3 (Annexure -F), without prejudice to the present petition and

D. Pass any such other orders and directions as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.”

2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.

3. A perusal of the material on record will indicate that the Electronic credit ledger of the petitioner was blocked by the impugned order at Annexure-A dated 11.09.2025, by invoking Rule 86A of the Central Goods and Services Tax Rules, 2017 (for short ‘the CGST Rules’). In this context, learned counsel for the petitioner invited my attention to the material on record in order to point out that before passing the impugned order, pre-decisional hearing was not provided to the petitioner nor does the impugned order contain any reason to believe as to why it was necessary to block the Electronic credit ledger and in view of the judgment of the Division Bench of this Court in the case of K-9-Enterprises Vs. State of Karnataka reported in W.A.No.100425/2023 and connected matters, the impugned order deserves to be quashed.

4. Per contra, learned counsel for respondents supports the impugned order and submit that there is no merit in the petition and the same is liable to be dismissed.

5. In K-9-Enterprises’s case referred to supra, the following points were answered in favour of the petitioner- assessee by holding as under:

"8.13 In view of the aforesaid discussion, we are of the considered opinion that the learned Single Judge clearly fell in error in coming to the conclusion that a pre-decisional hearing was not required to have been provided/granted to the appellants by the respondents- revenue prior to passing the impugned orders blocking the ECL of the appellants and consequently, the said findings recorded by the learned Single Judge deserve to be set aside.

9. The next point that arises for consideration is as to whether the respondents-revenue were justified in passing the impugned orders blocking the Electronic Credit Ledgers of the appellants by invoking Rule 86A of the CGST Rules which mandates that the respondents-revenue should have ‘reasons to believe’ that the ITC available in the ECL was fraudulently availed or was in