Prima facie ITC blocking under GST sustained, but conditional account operation allowed pending delayed adjudication.

Punjab and Haryana HC noted that Input Tax Credit blocking under Section 86A of the CGST Act may be sustained on a prima facie basis where material suggests fake invoices and non-existent dealers, even without a prior show cause notice or hearing at that stage. The Court treated the provision as a revenue-protective measure based on preliminary satisfaction. However, because the Section 74 adjudication had remained pending for a substantial period, the Court emphasised prompt disposal and balanced business continuity by allowing operation of the blocked bank account against surety for the blocked amount.

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Issues: Whether the blocking of the assessee's Input Tax Credit and bank account under Section 86A of the Central Goods and Services Tax Act, 2017 was justified, and whether the assessee was entitled to operate its account pending completion of proceedings under Section 74 of the Central Goods and Services Tax Act, 2017.

Analysis: The blocking was upheld on the basis of information indicating use of fake invoices and non-existent dealers, which furnished a prima facie basis for invoking Section 86A to protect revenue. The absence of a prior show cause notice or hearing was not treated as fatal at that stage, since the provision operates on a preliminary satisfaction standard. At the same time, the pending adjudication under Section 74 had remained unresolved for a substantial period, and the need for timely disposal of such proceedings was emphasised. The Court therefore balanced revenue protection with the assessee's right to carry on business by directing expeditious final adjudication and permitting operation of the account against surety.

Conclusion: The blocking under Section 86A was sustained, but the assessee was granted relief to operate its account upon furnishing surety of the blocked amount, with a direction for prompt completion of the proceedings.

Final Conclusion: The petition was disposed of with limited relief to the assessee, while preserving the revenue's safeguard pending final adjudication.

Ratio Decidendi: Section 86A can be invoked on a prima facie basis to protect revenue from alleged fake ITC claims, but prolonged pendency of the substantive adjudication may justify conditional permission to operate the blocked account.

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