Input tax credit blocking requires contemporaneous written reasons before Rule 86A can be validly invoked.

Rule 86A of the Tamil Nadu GST Rules permits blocking debit of electronic credit ledger only where the officer has objective reasons to believe that input tax credit was fraudulently availed or otherwise ineligible, and those reasons must be recorded and contemporaneously communicated in writing to the assessee. The rule does not expressly require prior notice, but the nature and consequences of the power demand disclosure of the basis for action. Where no written reasons are furnished beyond a reference to the supplier's name, the block on input tax credit cannot be sustained, though the department may proceed afresh in accordance with Rule 86A.

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Issues: Whether the block on input tax credit in the electronic credit ledger could be sustained under Rule 86A of the Tamil Nadu Goods and Services Tax Rules, 2017 in the absence of contemporaneously communicated written reasons.

Analysis: Rule 86A empowers the officer to disallow debit of the electronic credit ledger where there are reasons to believe that credit has been fraudulently availed or is otherwise ineligible. The power is conditional upon objective satisfaction and the recorded reasons must be communicated in writing to the affected assessee. Though the rule does not expressly require prior notice, the nature of the power and its consequences require contemporaneous disclosure of the reasons. In the present case, apart from reference to the supplier's name, no reasons were furnished when the credit was blocked.

Conclusion: The block on input tax credit could not be sustained and the assessee was entitled to unblocking of the credit.

Final Conclusion: The writ petition was allowed to the extent of directing removal of the block on the input tax credit, while leaving open the respondents' right to proceed afresh in accordance with Rule 86A.

Ratio Decidendi: A restriction on input tax credit under Rule 86A cannot be sustained unless the officer records and contemporaneously communicates written reasons showing the requisite basis for invoking the power.

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