Natural justice applies to GST credit ledger blocking: competent authority must give notice and hearing before Rule 86A action.

Rule 86A of the Rajasthan and Central GST Rules permits blocking debit of an electronic credit ledger only where the Commissioner or other authorised officer records written reasons to believe that input tax credit has been fraudulently availed or is ineligible. Even though the rule does not expressly mention a hearing, the competent authority must still give notice and hear the affected person before deciding to block the ledger. A notice issued by an officer lacking power to make the final decision is insufficient, and blocking without hearing prima facie breaches natural justice. The court therefore kept the blocking in abeyance and restrained the respondents from acting on it.

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Issues: Whether the electronic credit ledger could be blocked under Rule 86A without notice and hearing to the affected person.

Analysis: Rule 86A of the Rajasthan Goods and Services Tax Rules, 2017 and the Central Goods and Services Tax Rules, 2017 empowers the Commissioner or an authorised officer, not below the rank prescribed by the rule, to disallow debit of electronic credit ledger where there are reasons to believe that input tax credit has been fraudulently availed or is ineligible, and reasons must be recorded in writing. Even though the rule does not expressly provide for a hearing, the authority exercising the statutory power is obliged to hear the affected person before taking a decision. In the present case, the notice was issued by an authority who was not competent to take the final decision, while the impugned blocking order was passed by the competent authority without hearing the petitioner. Such a procedure prima facie violates the principles of natural justice.

Conclusion: The blocking of the petitioner's electronic credit ledger was kept in abeyance and the respondents were restrained from giving effect to the blocking decision.

Ratio Decidendi: When a statutory power to block input tax credit is exercised without expressly excluding fairness, the competent authority must afford notice and hearing to the affected person before acting on the material and recording reasons in writing.

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