ITC Block Under Rule 86A Can’t Replace Adjudication | HC

Case Details: Gopal Metal Stores vs. Assistant Commissioner of State Tax [2026] 183 taxmann.com 269 (Calcutta)

Judiciary and Counsel Details

• Om Narayan Rai, J.
• Ankit Kanodia, Ms M. Agarwal, P. Khaitan & Ms Tulika Roy for the Petitioner.
• Tanoy Chakraborty & Saptak Sanyal for the Respondent.

Facts of the Case

The petitioner filed a writ petition challenging the Assistant Commissioner of State Tax’s refusal to initiate adjudication proceedings after the petitioner’s electronic credit ledger (ECL) was blocked under Rule 86A of the CGST Rules. It was submitted that the ECL had been blocked on suspicion that input tax credit (ITC) had been fraudulently availed. It was contended that the blocking of ITC under Rule 86A is an interim protective measure and does not dispense with the statutory requirement of adjudication. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Rule 86A clearly provides that if revenue authorities have reasons to believe that ITC in the ECL has been ineligibly availed, they may withhold a corresponding amount as a temporary measure to secure potential tax liability. The Court emphasized that such blocking is intended solely as an interim security and does not negate the requirement for statutory adjudication under Section 17 of the CGST Act and the West Bengal GST Act. The Court directed the proper officer to promptly initiate adjudication proceedings, issue an appropriate show cause notice, and conclude the adjudication by passing a reasoned order. The writ petition was allowed.