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

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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.

List of Cases Reviewed

List of Cases Referred to

The post Negative Blocking of ITC Ledger Beyond Available Balance Not Allowed | HC appeared first on Taxmann Blog.

source

1

Auditing - Assurance

2

Goods & Services Tax

3

Investment in India by Foreign Nationals & NRI's

4

Accounting & Bookkeeping

5

International Taxation

6

Startup Services

7

Mergers & Acquisition Advisory

8

Income Tax

9

Corporate Financial Services

10

Indian Business Advisory Service
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