TaxTMI 
TaxTMI 
2026 (6) TMI 886
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...., quash the same and consequently to direct the respondents to unblock the Input Tax Credit (ITC) of Rs. 4,10,94,906/- under the CGST and SGST Acts in the petitioner's Electronic Credit Ledger and permit the petitioner to utilize such credit for discharge of its GST liabilities. 2. The petitioner's case is that it is engaged in manufacturing TMT steel bars and is registered under the CGST and SGST Acts, bearing Registration No. 33AACCV8997L1ZH. A search was conducted at the petitioner's premises on 16.09.2025. Subsequently, another search was conducted on 14.10.2025. Thereafter, the petitioner's Electronic Credit Ledger, to the extent of Rs. 1,04,56,891/- under the CGST and SGST Acts, was blocked on 26.11.2025. Likewise, ....
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....tition has been filed. 5. Mr. T. Bashyam, learned counsel appearing for the petitioner, would submit that the petitioner has been put to grave prejudice on account of the blocking of the Input Tax Credit. According to the learned counsel, the assessment proceedings relating to the transactions in question have not been completed to date. In such circumstances, the use of the expression "fraudulent" by the Revenue is wholly unwarranted and premature. 6. The learned counsel would further contend that even assuming that some of the petitioner's suppliers were not carrying on business at their declared places of business or had availed of or passed on bogus Input Tax Credit, appropriate action ought to be initiated only against those ....
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....el submitted that a similar order may be passed in the present case as well. It is further submitted that the petitioner is ready and willing to deposit a sum of Rs. 40,00,000/- without prejudice to its rights and contentions. 9. Per contra, Mr. R. Gowri Shankar, learned Senior Standing Counsel appearing for the Revenue, by placing reliance on the impugned order as well as the counter affidavit, would submit that the present case is not merely one of purchase of goods by the petitioner from suppliers whose credentials were not independently verified. According to the learned Senior Standing Counsel, the Input Tax Credit has been blocked in respect of four specific transactions. Upon inspection and verification of the records, the Departm....
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....13. Rule 86A of the CGST Rules, 2017 empowers the Commissioner, or an officer authorized by him and not below the rank of Assistant Commissioner, to disallow the debit of an amount equivalent to the Input Tax Credit available in the Electronic Credit Ledger where he has reasons to believe that such credit has been fraudulently availed or is otherwise ineligible for any of the reasons specified therein. Such reasons must be recorded in writing. The restriction imposed under the Rule remains in effect for one year. 14. Upon consideration of the judgments relied upon by both sides, it is evident that the power under Rule 86A, being drastic in nature, must be exercised with due care and caution. A reading of the Karnataka High Court judgment....
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....ysically supplied the goods allegedly purchased by the petitioner. Physical verification of the business premises of those entities revealed vacant premises devoid of the infrastructure necessary for handling TMT rods or scrap materials. The authorities have therefore concluded that they were merely fake bill-trading entities. 17. Further, with regard to the petitioner's premises, the CCTV footage corresponding to the alleged dates and times of arrival of the vehicles was examined, and no evidence was found showing the entry or exit of the vehicles purportedly transporting the goods. Consequently, the invoices have been treated as non-genuine. It is also recorded that slips bearing higher serial numbers were shown as having been rece....