Rule 86A only permits blocking available input tax credit; negative ledger balances are not authorised.

Rule 86A of the CGST Rules permits only a temporary preventive freeze of input tax credit that is actually available in the Electronic Credit Ledger, and only where recorded reasons show fraudulently availed or ineligible credit. The power is confined to withholding debit of existing credit for an equivalent amount; it does not authorise creation of a negative balance or blocking beyond the credit standing in the ledger when the order is made. If no credit is available or it has already been utilised, Rule 86A cannot be invoked, and any recovery must proceed under the statutory machinery in Sections 73 and 74 of the CGST Act.

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Issues: Whether Rule 86A of the Central Goods and Services Tax Rules, 2017 permits the Commissioner or an authorised officer to block a taxpayer's Electronic Credit Ledger by an amount exceeding the credit available at the time of the order.

Analysis: The Court adopted the view that Rule 86A is a temporary preventive measure and can be invoked only when input tax credit is actually available in the Electronic Credit Ledger and there is reason to believe, recorded in writing, that such credit is fraudulently availed or ineligible. On a plain reading of the rule, the power is limited to withholding debit of available credit for an equivalent amount; it does not authorise creation of a negative balance or debit entries beyond the credit then standing in the ledger. If credit is unavailable or already utilised, the rule cannot be invoked, and recovery, where permissible, must be pursued under the statutory machinery under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017.

Conclusion: Negative blocking in excess of the credit available in the Electronic Credit Ledger is not permitted under Rule 86A; the impugned blocking was unsustainable and the writ petition was allowed in favour of the petitioner.

Ratio Decidendi: Rule 86A authorises only a limited preventive restriction against debit of available input tax credit and cannot be used to create a negative ledger balance or to block more than the credit existing when the order is passed.

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