HC Sets Aside Order Blocking Credit Ledger Under Rule 86A

Case Details: Rithwik Projects (P.) Ltd. vs. Union of India - [2025] 179 taxmann.com 256 (Bombay) 

Judiciary and Counsel Details

• R.G. Avachat & Abasaheb D. Shinde, JJ.
• Darius B. Shroff, Sr Counsel, Ashok Singh, Bharat Jain & A.C. Darandale, Advs. for the Petitioner
• A.G. Talhar, A.S.G., D.S. Ladda, Standing Counsel & Pratik Kothari, Adv. for the Respondent

Facts of the Case

The petitioner’s electronic credit ledger was blocked under Rule 86A of CGST Rules and Maharashtra GST Rules. The impugned order recorded no “reason to believe” or any reasons for such blocking. Notices and summons were issued seeking documents, including details of supplies by Darwin Platforms Infrastructure Limited. The petitioner appeared once, requested time, but did not thereafter comply with the requirements. A writ petition was filed contending that the ledger was blocked without reasons and without affording a post-decisional hearing. The legal issue arising was whether blocking the electronic credit ledger without reasons and without a hearing violated principles of natural justice. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that no reasons were recorded while blocking the petitioner’s electronic credit ledger, and the respondents agreed to grant a hearing. Interference was warranted, and the blocking order was set aside, subject to a bank guarantee. The respondents were directed to provide a full opportunity of hearing and pass fresh orders within four months and not to encash the guarantee until four months after the decision.

List of Cases Referred to

• New Nalbandh Traders v. State of Gujarat [2022] 136 taxmann.com 284/66 GSTL 334 (Gujarat) (para 2)
• Transtech Solution v. Commissioner of CT & GST [W.P.(C) No. 13821 of 2025, dated 24-7-2025] (para 4).