Bombay High Court
S S GoldversusUnion of India
- Decided
- Disposal
- DISPOSED OFF
Holding
A restriction imposed under Rule 86A expires after one year; therefore, the order blocking the petitioner’s ITC on 17 May 2024 is void and must be quashed.
Summary
The petitioner, S S Gold, a GST‑registered company, had its Electronic Credit Ledger blocked for Rs 7,16,01,876 on 17 May 2024 under Rule 86A of the CGST Rules, despite having only Rs 2,41,642 of available ITC, which created a negative balance. The blocking notice cited a "supplier found non‑functioning, registration of supplier has been cancelled" but did not name any specific supplier. The petitioner challenged the order by filing a writ petition under Article 226 seeking quashing of the blocking order. The Court examined Rule 86A, particularly clause (3) which provides that any restriction imposed under the rule ceases after one year from the date of imposition. Since more than a year had elapsed by the date of judgment (17 September 2026), the Court held that the restriction was no longer valid and ordered the quashing of the blocking order. The petition was allowed in respect of prayer‑A, while prayers‑B and‑C were left open for the petitioner to pursue alternative remedies.
Issues considered
- What is the effect of the one‑year limitation under Rule 86A(3) on a blocking order that was issued more than a year earlier?
- Whether the blocking of ITC without specifying the supplier and despite insufficient credit balance is legally sustainable.
Legislation cited
- Central Goods and Services Tax Act, 2017 — s. Section 49
- Central Goods and Services Tax Rules, 2017 — s. Rule 86A
Subjects
- GST
- Input Tax Credit
- Rule 86A
- Blocking of ITC
- Article 226
- Writ of Certiorari
- Negative balance
- Supplier cancellation
Judgment
ARJUN
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MACHHINDRA
KADAM
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed by ORDINARY ORIGINAL CIVIL JURISDICTION
ARJUN
MACHHINDRA
KADAM
Date: 2026.09.17 WRIT PETITION NO. 1222 OF 2025
18:24:29 +0530
S S Gold … Petitioner
Versus
Union of India & Ors. ... Respondents
__________________________
Mr. Avinash Poddar i/b Ms. Deepali Kamble (through VC) for the
Petitioner.
Mr. Amar Mishra, AGP for the Respondent-State.
Ms. Megha Bajoria a/w. Ms. Khushi P. Agarwal for the Respondent-
UoI.
__________________________
CORAM : M. S. KARNIK AND
SANDESH D. PATIL, JJ.
DATED : 17th SEPTEMBER, 2026.
P.C. :
1. Heard learned counsel for the petitioner and learned AGP
for the respondent-State.
2. By this petition under Article 226 of the Constitution of
India, the petitioner-company prays for the following reliefs in terms
of prayer clause (A) which reads thus: -
“(A) Issue a writ of certiorari or writ in the nature of
certiorari or any other appropriate writ or order quashing
and setting aside the Order of blocking of ITC under Rule
86A along with attachment notice amounting to
Rs.7,16,01,876/- dated 17.05.2024.”
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3. The facts of the case in brief are that the petitioner is holding
GST registration. The petitioner's Electronic Credit Ledger was
blocked to the amount of Rs.7,16,01,876/- on 17 th May, 2024. The
available ITC balance for the month of May, 2024 was Rs. 2,41,642/-
which was utilized, resulting in a negative balance of
Rs.7,13,60,234/- reflecting on the GSTN (Common Portal). The only
reason reflected on the GSTN (Common Portal) for this action is
“Supplier found non-functioning, Registration of supplier has been
cancelled”.
4. It is the contention of the learned counsel for the
petitioner that no specific supplier's name is mentioned on the GSTN
(Common Portal), which renders the reasoning vague and cryptic.
5. It is then submitted by the learned counsel for the
petitioner that on 17th May, 2024, when the ITC of Rs.7,16,01,876/-
was blocked, the petitioner's Electronic Credit Ledger reflected an
ITC balance of only Rs.2,41,642/-. Therefore, there was no basis for
blocking any further ITC. Following this blocking action, the
Petitioner's Electronic Credit Ledger showed a negative balance of
Rs.7,13,60,234/-. Learned counsel for the petitioner states that the
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business is at a stand still.
6. We have heard learned AGP for the respondents, who
argued in support of the impugned order.
7. So far as the negative blocking is concerned, learned
counsel for the petitioner relied upon the decision of the High Court
of Gujarat in Samay Alloys India Pvt. Ltd. Vs. State of Gujarat
decided on 3rd February, 2022. However, in view of the passage of
time and the provisions of Rule 86A of the CGST Rules, 2017 the
issue of negative blocking need not now be gone into by us.
8. Relevant for a decision is Rule 86A which reads thus:-
“86A. Conditions of use of amount available in electronic
credit ledger
(1) The Commissioner or an officer authorised by him in this
behalf, not below the rank of an Assistant Commissioner,
having reasons to believe that credit of input tax available in
the electronic credit ledger has been fraudulently availed or is
ineligible in as much as-
a) the credit of input tax has been availed on the strength of
tax invoices or debit notes or any other document prescribed
under rule 36-
i. issued by a registered person who has been found non-
existent or not to be conducting any business from any place
for which registration has been obtained; or
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ii. without receipt of goods or services or both; or
b) the credit of input tax has been availed on the strength of
tax invoices or debit notes or any other document prescribed
under rule 36 in respect of any supply, the tax charged in
respect of which has not been paid to the Government; or
c) the registered person availing the credit of input tax has
been found non-existent or not to be conducting any business
from any place for which registration has been obtained; or
d) the registered person availing any credit of input tax is not
in possession of a tax invoice or debit note or any other
document prescribed under rule 36,
may, for reasons to be recorded in writing, not allow debit of
an amount equivalent to such credit in electronic credit ledger
for discharge of any liability under section 49 or for claim of
any refund of any unutilised amount.
(2) The Commissioner, or the officer authorised by him under
sub-rule (1) may, upon being satisfied that conditions for
disallowing debit of electronic credit ledger as above, no
longer exist, allow such debit.
(3) Such restriction shall cease to have effect after the expiry
of a period of one year from the date of imposing such
restriction.”
9. Rule 86A (3) provides that the restriction imposed under
Rule 86A shall cease to have effect after the expiry of a period of one
year from the date of imposing such restriction. The restriction in
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the present case on the input tax credit was imposed on 17 th May,
2024. The period one year stated in terms of Clause 3 of Rule 86A
has since expired.
10. The petition will therefore have to be allowed and is
accordingly allowed in terms of prayer clause (A).
11. So far as prayer clauses (B) and (C) are concerned,
learned counsel for the petitioner on instructions submits that he
would not be pressing reliefs in terms of prayer clauses (B) and (C)
for which he may be allowed to avail the alternate efficacious
remedy available if necessary. Keeping this liberty of the petitioner
open to avail the alternate remedy available to the petitioner for
pursuing reliefs in terms of prayer clauses (B) and (C), the petition is
allowed in terms of prayer clause (A).
12. So far as prayer clauses (B) and (C) are concerned, all
the rights and contentions of the parties are kept open.
13. The petition is disposed of.
(SANDESH D. PATIL, J.) (M. S. KARNIK, J.)
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