Electronic Credit Ledger Blocking under Rule 86A requires independent reasons to believe and fair procedure before restriction.

Rule 86A of the CGST Rules permits blocking of an electronic credit ledger only on the basis of independent, recorded reasons to believe founded on objective material. A blocking order passed without a pre-decisional hearing was treated as procedurally infirm because the measure has serious civil consequences and directly restricts use of input tax credit. The order also failed because it rested on borrowed satisfaction from enforcement reports rather than an independent application of mind. The court quashed the blocking and directed unblocking of the ledger, while leaving the revenue free to proceed in accordance with law.

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Issues: (i) Whether the blocking of the electronic credit ledger under Rule 86A of the Central Goods and Services Tax Rules, 2017 was sustainable without a pre-decisional hearing; (ii) Whether the impugned order could stand when it was founded on borrowed satisfaction and lacked independent, cogent reasons to believe.

Issue (i): Whether the blocking of the electronic credit ledger under Rule 86A of the Central Goods and Services Tax Rules, 2017 was sustainable without a pre-decisional hearing.

Analysis: Rule 86A confers an extraordinary power to disallow debit from the electronic credit ledger and its exercise has serious civil consequences for the taxpayer. The order blocking credit was passed without granting a pre-decisional hearing. In the context of this drastic measure, the absence of such hearing was treated as a serious procedural infirmity, especially when the ledger blockage directly affected the petitioner's ability to use input tax credit.

Conclusion: The blocking order was unsustainable for want of a pre-decisional hearing.

Issue (ii): Whether the impugned order could stand when it was founded on borrowed satisfaction and lacked independent, cogent reasons to believe.

Analysis: Invocation of Rule 86A requires the competent authority to form an independent opinion on objective material and to record reasons to believe that the credit was fraudulently or wrongly availed. The impugned order merely relied on reports of enforcement authorities and did not disclose an independent application of mind or tangible material justifying the blocking action. Such borrowed satisfaction did not satisfy the statutory preconditions for exercising the power under Rule 86A, rendering the order mechanical and non-speaking.

Conclusion: The impugned order was invalid because the mandatory requirements of Rule 86A were not satisfied.

Final Conclusion: The writ petition succeeded, the blocking order was quashed, and the respondents were required to unblock the petitioner's electronic credit ledger, while retaining liberty to proceed in accordance with law.

Ratio Decidendi: The power to block an electronic credit ledger under Rule 86A can be exercised only on the basis of independent, recorded reasons to believe founded on objective material, and not on borrowed satisfaction or without observance of fair procedure where warranted by the nature of the action.

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