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Issues: Whether blocking of input tax credit under Rule 86A(1) of the CGST Rules, 2017 was sustainable in the absence of a recorded reason to believe based on relevant material and independent application of mind by the competent authority.
Analysis: The power to block credit is an exceptional power and can be exercised only when the competent authority records in writing reasons to believe that the credit has been fraudulently availed or is otherwise ineligible. A bare endorsement that the authority acted on a recommendation, without disclosing any objective basis or independent consideration of the material, does not satisfy the statutory precondition. Suspicion, generic intelligence inputs, or ex parte investigation material, without a nexus to the assessee and without a reasoned formation of belief, is insufficient to sustain the action.
Conclusion: The blocking order was invalid for want of recorded reasons to believe and independent application of mind, and the assessee succeeded on this issue.
Ratio Decidendi: Exercise of power under Rule 86A(1) of the CGST Rules, 2017 requires the competent authority to record in writing a reason to believe founded on relevant and tangible material, with independent application of mind; a mere recommendation or general suspicion is insufficient.
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