Rule 86A input tax credit blocking sustained where objective material supported reasons to believe credit was ineligible.

Blocking of input tax credit under Rule 86A was treated as valid where objective material showed the supplier was non-existent at the declared business place and had allegedly passed on irregular credit without actual supply, giving the authority reasons to believe that the credit was ineligible or fraudulently availed. The Court distinguished cases involving wholly mechanical or non-speaking orders, found sufficient basis for the requisite satisfaction on the facts, and noted that the available post-decisional remedial process supported the interim action. The writ challenge therefore failed, and reconsideration was left to the statutory and administrative mechanism.

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Issues: Whether blocking of input tax credit under Rule 86A was invalid for want of independent application of mind, recorded reasons, and pre-decisional hearing, and whether the impugned blocking order could be interfered with in writ jurisdiction.

Analysis: Rule 86A permits the Commissioner or an authorised officer to block debit in the electronic credit ledger where there are reasons to believe that input tax credit has been fraudulently availed or is ineligible. The materials before the authority included information that the supplier was found non-existent at its declared place of business and had allegedly passed on irregular credit without actual supply. On those materials, the Court found that the authority had sufficient basis to form the requisite satisfaction. It distinguished decisions dealing with wholly non-speaking or mechanical orders and held that, on the facts, the impugned action was not shown to be arbitrary or without foundation. The Court also noticed the remedial mechanism under the guidelines, including the possibility of fresh examination and post-decisional consideration.

Conclusion: The blocking of input tax credit was upheld and no writ relief was granted.

Final Conclusion: The challenge to the temporary blocking of input tax credit did not succeed, while the petitioner was left to pursue the statutory and administrative remedy for reconsideration.

Ratio Decidendi: An order blocking input tax credit under Rule 86A will not be interfered with when it is supported by objective material giving rise to reasons to believe that the credit is ineligible or fraudulently availed, and the availability of a post-decisional remedial mechanism can sustain the interim action.

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