The legitimacy of blocking electronic credit ledgers under Rule 86A requires independent verification of supplier transactions, not just reliance on external reports.

JUDGMENT :

ZIYAD RAHMAN A.A., J.

[WP(C) Nos.12186/2026, 1795/2026, 11916/2026]

In all these cases, a common issue regarding the sustainability of the proceedings initiated against the petitioners under Rule 86A of the CGST Rules is involved. As per the impugned orders, by invoking the powers under the Rule referred to above, the electronic credit ledgers of the petitioners are blocked by the respondents. As far as W.P.(C) No.12186 of 2026 is concerned, what is under challenge is a notice of blocking the credit.

2. In W.P.(C) No.1795 of 2026, Ext.P3 is the order passed under Rule 86A . The reason for issuing the said order is that, certain supplies received by the petitioner from one M/s. S.K. Scraps were found to be bogus, since the registration of the supplier of the said articles, namely M/s. S.K. Scraps was found to have been cancelled suo motu, with effect from 25.06.2024. It was also stated therein that, the registration of M/s. S.K. Scraps, the supplier of the petitioner, was cancelled on 01.11.2025 with effect from 31.08.2024. The relevant transactions took place during the month of September 2024. In the said writ petition, the petitioner also seeks to declare that the provisions contained in Rule 86A of the Central Goods and Services Tax Rules and the corresponding Rule 86A in the Kerala State Goods and Services Tax Rules, 2017, are arbitrary, unreasonable, ultra vires, unconstitutional, and thereby unenforceable.

3. In W.P.(C).No.11916 of 2026, the petitioner is aggrieved by Ext.P7 email communication and Ext.P6, which shows the blocking of the credit ledger of the petitioner. The reasons mentioned in Ext.P6 are that the supplier of the petitioner was found to be not functioning. Exts.P6 and P7 were issued based on Ext.P1 notice, wherein the reason mentioned is that the transactions effected during the months of July 2024 and August 2024 with M/s.BLR Traders are bogus, as it is reported by the Karnataka GST Authorities that the supplier is non-existent at the registered place of business.

4. When it comes to the challenge in W.P.(C) No.12186 of 2026, Ext.P2 is the communication issued by the Additional Commissioner of Commercial Taxes (Enforcement) Bengaluru, based on which, the electronic credit ledger of the petitioner is blocked. The reason stated therein is in relation to the transactions which occurred during the period from March 2022 to November 2024 with one M/s S.M.Traders whose registration was cancelled suo motto with effect from 20.03.2022.

5. In all these cases, the challenge is raised mainly on the ground that the proceedings were initiated by the GST authorities in the State of Kerala based on the intimation received from GST authorities outside the State. It is also pointed out by the petitioners that, in all the cases, there is no finding entered into by the authorities of the State which invoked Rule 86A that, there exists a reasonable belief that the transactions carried out by the petitioners with the respective suppliers were not proper. On the other hand, the State authorities simply relied on the reports of the authorities from outside the State, to the effect that the registration of the suppliers of the petitioners was either cancelled or that they were found to be non-existent at the relevant time.

6. Thus, according to the petitioners, without specifica