Blocking of an electronic credit ledger under Rule 86A requires independent verification and justifiable reasons, making pre-decisional hearings essential before such actions.

ORDER :

S.R. KRISHNA KUMAR, J.

Learned AGA accepts notice for the respondents.

2. In this petition, the petitioner seeks the following reliefs:

A) Issue a Writ of Certiorari or Writ in the nature of Certiorari quashing the order passed by resp-2 u/s 86A R/W 16 of the KGST/CGST Act. blocking credit ledger of the Petitioner at ANNEXURE-C dated 16/06/2025 issued by Resp-2 for the period 2024-25 in so far as the petitioner is concerned.

B) Issue a Writ of Certiorari or Writ in the nature of Certiorari quashing the order passed by resp-2 u/s 86A R/w 16 of the KGST/CGST Act, blocking credit ledger of the Petitioner at ANNEXURE-D dated 16/06/2025 issued by Resp-2 for the period 2023-24 in so far as the petitioner is concerned.

C) Issue a Writ of Certiorari or Writ in the nature of Certiorari quashing the order passed by resp-2 u/s 86A R/w 16 of the KGST/CGST Act, blocking credit ledger of the Petitioner at ANNEXURE-E dated 16/06/2025 issued by Resp-2 for the periods 2023-24 and 2024-25 in so far as the petitioner is concerned.

D) Issue a Writ of Certiorari or Writ in the nature of Certiorari quashing the order passed by resp-2 u/s 86A R/w 16 of the KGST/CGST Act, blocking credit ledger of the Petitioner at ANNEXURE-F dated 20/09/2025 issued by Resp-2 for the period 2022-23 in so far as the petitioner is concerned.

E) Issue any other directions as this Hon'ble Court deems fit to pass in the facts and circumstances of the case in the interest of justice and equity including the cost of the Writ Petition.

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

4. A perusal of the material on record will indicate that the Electronic credit ledger of the petitioner was blocked by the impugned orders at Annexures - C, D, E and F for the period 2024- 25, 2023-24 and 2022-23 dated 16.06.2025 and 20.09.2025 respectively, by invoking Rule 86A readwith 16 of Karnataka Goods and Service Tax Act / the Central Goods and Services Tax Rules, 2017 (for short ‘the KGST/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.

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

6. 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 fraud