Blocking ECL Without Independent Analysis Invalid | HC

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Blocking Electronic Credit Ledger Invalid

Case Details: RDTMT Steels (India) (P.) Ltd. vs. Assistant Commissioner of Commercial Tax (Admin), Mandya - [2026] 182 taxmann.com 324 (Karnataka)

Judiciary and Counsel Details

  • S.R.Krishna Kumar, J.
  • Shreehari Kutsa, Adv. for the Petitioner.
  • Smt. Jyoti.M.Maradi, HCGP for the Respondent.

Facts of the Case

The petitioner challenged the order blocking the petitioner’s electronic credit ledger, invoking Rule 86A of the CGST Rules and the Karnataka GST Rules. It was contended that the competent authority did not provide a pre-decisional hearing, the impugned order did not record independent or cogent reasons to believe that blocking was necessary, and that the order was based solely on reports/communication of the enforcement authority without any independent analysis. It was submitted that the impugned order was cryptic and failed to form an opinion as mandated under Rule 86A. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the impugned order was arbitrary and reflected a premeditated conclusion, as it did not record an opinion and was based on the satisfaction of another officer, not on independent analysis by the competent authority. It was observed that the order was cryptic, unreasoned, and non-speaking, failing to meet the test of formation of an opinion and not supported by valid or sufficient material constituting ‘reasons to believe’. The Court held that the mandatory requirements under Rule 86A were not fulfilled, rendering the order vitiated and liable to be quashed.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied