Input tax credit blocking under GST is preventive, not recovery, and can rest on recorded reasons to believe.

Rule 86A of the GST Rules authorises temporary blocking of utilisation of input tax credit where the authorised officer has recorded reasons to believe the credit was fraudulently availed or otherwise ineligible. The provision is a preventive, lien-like restriction on the electronic credit ledger and is distinct from recovery under Sections 74, 78 or 79. The expression "input tax available" refers to credit previously availed, not only the balance standing in the ledger on the date of the order. On that basis, the blocking order was within jurisdiction and not premature merely because adjudication and recovery proceedings were still pending.

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Issues: Whether Rule 86A of the State/Central Goods and Services Tax Rules, 2017 authorises blocking of input tax credit on the basis of prior fraudulent or ineligible availment, and whether such action is barred as a recovery measure or as premature while adjudication under the GST Act is pending.

Analysis: Rule 86A is not a recovery provision. Its object is to secure the interest of revenue by disabling debit of an equivalent amount in the electronic credit ledger where the authorised officer has reasons to believe that input tax credit has been fraudulently availed or is ineligible. The expression "input tax available" refers back to the credit that had earlier been availed and does not mean only the credit standing in the ledger on the date of the order. The power is founded on recorded reasons to believe, including a prima facie case that the selling dealer was non-existent or otherwise within the mischief described in the Rule. The provision creates a lien-like restriction on utilisation and does not amount to appropriation or recovery under Sections 74, 78 or 79 of the GST Act.

Conclusion: The challenge to the Rule 86A order failed. The blocking order was held to be within jurisdiction and not premature merely because adjudication and recovery proceedings were still pending.

Final Conclusion: The writ petition was rejected, and the revenue's action under Rule 86A was sustained as a preventive measure distinct from statutory recovery.

Ratio Decidendi: Rule 86A permits temporary blocking of utilisation of input tax credit on the basis of recorded reasons to believe regarding fraudulent or ineligible availment, and such blocking is distinct from recovery proceedings under the GST Act.

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