The authorities must provide independent reasons and evidence to block a taxpayer's Electronic Credit Ledger under Rule 86A; reliance on borrowed satisfaction is impermissible.

ORDER :

S.R. Krishna Kumar, J.

In this petition, petitioner seeks for the following reliefs:-

(A) Declare that the Impugned blocking of the Petitioner’s Electronic Credit Ledger on 12.09.2025 vide Reference No BL2909250000233, 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 A1 )

(B) Consequently, issue a writ of mandamus or direction in the nature of mandamus directing the Respondent No.1 to forthwith unblock and restore the Input Tax Credit wrongly debited to the extent of Rs. 3,44,094/- (Rupees Three Lakhs Forty Four Thousand Ninety Four 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) Issues of writ of certiorari or in the nature of certiorari to set aside Shoe Cause Notice dated 17.10.2025 bearing File No. GEXCOM/AE/INV/GST/8706/2025- AE-O/o Pr COMMR-CGST- Mysuru, Show Cause Notice Sl., No. GEXCOM/AE/INV/GST/20/2025-26 and DIN: 20251057YY0000212262 issued to the Petitioner (Annexure-J); 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 12.09.2025, 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 ineligible as contemplated in the said provision; in this regard, the learned Single Judge noticed that 2 pre-requisites/conditions had to be satisfied/fulfilled before invocation of Rule 86A and blocking the ECL of the appellants and held as under:

18. The first requisite of the Rule which is required to be considered by the competent authority is with regard to the basis of material available before he