Negative Blocking of ITC Ledger Beyond Available Balance Not Allowed | HC

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  • Last Updated on 12 December, 2025

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negative blocking ITC Rule 86A

Case Details: Mannat Steels vs. Union of India [2025] 181 taxmann.com 196 (Punjab & Haryana)

Judiciary and Counsel Details

  • Mrs Lisa Gill & Deepak Manchanda, JJ.
  • Pankaj Gupta, Adv. for the Petitioner.
  • Ajay Kalra, Senior Standing Counsel for the Respondent.

Facts of the Case

The petitioner, challenged the blocking of its electronic credit ledger (ECL). It was submitted that, under Rule 86A of the CGST Rules and the corresponding Punjab GST Rules, a negative blocking entry was created on the ECL despite the available balance being insufficient, without any prior notice. It was contended that Rule 86A does not authorise blocking of ITC beyond the balance actually available and that such action was inconsistent with the statutory scheme, emphasising that eligibility and recovery under GST must be determined through proper adjudication. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Rule 86A permits the jurisdictional officer under CGST to impose a temporary restriction on the debit of ITC when there are reasons to believe that the credit has been fraudulently or ineligibly availed, and that such restriction may be imposed without prior show-cause notice. The Court observed that creating negative blocking entries exceeding the actual ITC balance is impermissible, and that authorities could resort to statutory recovery procedures instead. It was further held that determination of eligibility for ITC must occur through formal adjudication.

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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