Rule 86A ledger blocking cannot replace adjudication; proceedings must start and finish within court-fixed timelines.

Blocking an electronic credit ledger under Rule 86A is only an interim safeguard against suspected fraudulent or ineligible input tax credit and is meant to operate pending adjudication. Once that restriction is imposed, the proper officer cannot refuse to initiate and conclude adjudication on the ground that the alleged violation is not suitable for adjudication, because continued blockage without proceedings would defeat the scheme of the CGST/WBGST framework. The Court directed issuance of a show cause notice, filing of reply, and completion of adjudication within fixed timelines, and provided that failure to conclude the proceedings would require unblocking of the ledger.

---

---

Issues: Whether a proper officer, having blocked an electronic credit ledger under Rule 86A, can refuse to initiate and conclude adjudication proceedings on the ground that the alleged violation is not suitable for adjudication.

Analysis: Rule 86A of the CGST/WBGST Rules permits temporary restriction on utilisation of input tax credit where the officer has reasons to believe that the credit has been fraudulently availed or is ineligible for the reasons specified in the rule. The restriction is an interim safeguard to secure the revenue and operates pending adjudication. Once the ledger is blocked on that basis, the officer cannot deny the very adjudicatory process that must follow. A continued blockage without initiation of adjudication would defeat the scheme of the 2017 tax enactments. The Court therefore directed issuance of a show cause notice within a fixed time, filing of reply by the petitioners, and completion of adjudication within a further stipulated period, with a clear consequence that failure to conclude the proceedings would require unblocking of the ledger.

Conclusion: The refusal to adjudicate could not be sustained, and the proper officer was directed to commence and complete adjudication within the timelines fixed by the Court, failing which the electronic credit ledger would have to be unblocked.

---