Natural justice required before blocking electronic credit ledger; order set aside for lack of prior notice and hearing.

Blocking an electronic credit ledger under Section 86A of the CGST Act entails serious civil consequences, so principles of natural justice require prior notice and hearing even though the provision does not expressly say so. The blocking order in question was unsustainable because the record did not show any notice or hearing before deprivation of input tax credit. The Karnataka HC set aside the impugned order for breach of audi alteram partem, while leaving the authorities free to proceed afresh in accordance with law and procedure.

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Issues: Whether the order blocking the petitioner's electronic credit ledger and input tax credit under Section 86A could be sustained without prior notice and hearing.

Analysis: The blocking of the electronic credit ledger has serious civil consequences, and the requirement of natural justice must be read into the exercise of power under Section 86A of the Central Goods and Services Tax Act, 2017. The order under challenge did not disclose issuance of notice or conduct of hearing before blocking the credit ledger.

Conclusion: The impugned blocking order was set aside for breach of natural justice. The respondent authorities were left at liberty to proceed afresh in accordance with law and procedure.

Final Conclusion: The challenge succeeded, and the impugned action could not stand for want of compliance with audi alteram partem before depriving the petitioner of use of input tax credit.

Ratio Decidendi: Even where Section 86A does not expressly provide for prior hearing, principles of natural justice apply before blocking the electronic credit ledger because such action entails serious civil consequences.

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