Rule 86A ITC Blocking Quashed for Procedural Lapse | HC

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  • Last Updated on 26 June, 2026

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Electronic Credit Ledger Blocking

Case Details: GVS Engineering and Construction vs. Assistant Commissioner of Commercial Taxes [2026] 187 taxmann.com 807 (Karnataka)

Judiciary and Counsel Details

  • B.M. Shyam Prasad, J.
  • K.M. Shivayogiswamy, Adv. for the Petitioner.
  • K. Hema Kumar, AGA for the Respondent.

Facts of the Case

The petitioner was a registered taxpayer maintaining input tax credit (ITC) in its electronic credit ledger. The jurisdictional officer under CGST invoked Rule 86A of the CGST Rules and the Karnataka GST Rules to block the electronic credit ledger on the allegation that the petitioner’s supplier was operating from non-existent premises. The petitioner contended that the blocking of the ledger without prior notice was contrary to the principles of natural justice and the procedure recognised by a Division Bench. The Department did not dispute the legal proposition regarding adherence to the prescribed procedure and submitted that independent proceedings had also been initiated. The petitioner confined its challenge to the blocking proceedings. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Rule 86A of the CGST Rules and the Karnataka GST Rules, read with Section 169 of the CGST Act and the Karnataka GST Act, required adherence to the procedure laid down by the Division Bench before restricting ITC. The Court held that the impugned blocking proceedings did not conform to the prescribed procedure and warranted limited interference. Accordingly, the proceedings were quashed, the jurisdictional officer under CGST was directed to immediately unblock the electronic credit ledger, and liberty was reserved to initiate fresh proceedings in accordance with the prescribed procedure under Rule 86A.

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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