Electronic credit ledger blocking under Rule 86A requires independent reasons and tangible material; order set aside for want of hearing.

Rule 86A blocking of an electronic credit ledger requires strict compliance with its preconditions, including an independent formation of reasons to believe based on objective and tangible material that input tax credit is ineligible or fraudulently availed. A blocking order based only on another authority's reports, without recorded independent reasons, is invalid. The absence of a pre-decisional hearing further supported interference. The HC set aside the blocking order as illegal and directed that the electronic credit ledger be unblocked.

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Issues: Whether the order blocking the petitioner's electronic credit ledger under Rule 86A of the Central Goods and Services Tax Rules, 2017 was liable to be quashed for want of pre-decisional hearing and for absence of independent, cogent reasons to believe based on tangible material.

Analysis: Rule 86A confers a drastic power to disallow debit from the electronic credit ledger and therefore its exercise must be preceded by strict compliance with the statutory preconditions. The material relied upon must disclose an independent formation of opinion and reasons to believe, based on objective and tangible material, that the input tax credit is ineligible or fraudulently availed. The impugned order disclosed reliance on reports of another authority and did not record independent reasons or a meaningful basis for invoking the power. The Court also accepted the contention that no pre-decisional hearing had been afforded before passing the blocking order.

Conclusion: The blocking order was illegal and liable to be set aside; the petitioner succeeded and the electronic credit ledger was directed to be unblocked.

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