The exercise of power to block an Electronic Credit Ledger under Rule 86A requires independent reasoning based on tangible evidence, not borrowed satisfaction, affirming the necessity for adherence to procedural rigor.

ORDER :

M.NAGAPRASANNA, J.

1. The petitioner is before this Court seeking the following prayer:

A. Issue Writ of Certiorari to quash the impugned Order no. 78/2025-26 dated 6-11-2025 issued by Respondent No.2 in Proceeding bearing No.ACCT/LGSTO-320/HBL/ITCB/2024-25 dated 10-11-2025 invoking Rule 86-A of the KGST/CGST Rules 2017 marked at Annexure-A issued by respondent No.2 in the interest of justice and equity.

B. Pass any other order deemed fit in the interest of justice and equality.

2. The learned counsel for the petitioner submits that the issue in the lis stands covered by judgment rendered by Coordinate Bench of this Court in W.P. No.25673/2025, disposed off on 28^th August 2025. The Coordinate Bench of this Court held as follows:

“3. The learned counsel appearing for the petitioner would submit that the issue in the lis stands covered by the judgment rendered by the Co-ordinate Bench in WP.No.23482/2024 disposed on 01.10.2024.The Co-ordinate Bench has held as follows:

"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 06.05.2024, 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, predecisional 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 WA.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 predecisional 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 prerequisites/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 taking any action for blocking of electronic credit ledger. The second pre-requisite is of recording the reasons in writing for invoking the powers under Rule 86A of the Rules of 2017. Unless the aforesaid two pre-requisites are fulfilled, the competent authority cannot invoke the powers under Rule 86A of the Rules of 2017 for the purpose of disallowing the debit of the determined amount to the electronic credit ledger or to block the electronic credit ledger even to th