2026-VIL-997-CAL
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SGST High Court Cases

GST - Blocking of Electronic Credit Ledger under Rule 86A, Requirement of pre-decisional hearing as mandatory procedural safeguard, Principles of natural justice - Respondent blocked Electronic Credit Ledger of the Petitioner alleging that suppliers were non-existent, without affording any pre-decisional hearing despite petitioner's request - Whether blocking of Electronic Credit Ledger under Rule 86A can be done without providing pre-decisional hearing to the taxpayer and whether principles of natural justice require opportunity to explain and rebut allegations before blocking order is passed - HELD – The Supreme Court in K-9 Enterprises affirmed that principles of natural justice necessarily require that pre-decisional hearing be provided and granted before invoking Rule 86A and blocking ECL. Blocking carries serious civil consequences affecting taxpayer's ability to discharge statutory obligations. Such serious action cannot be taken without first giving opportunity to taxpayer to respond - Rules of natural justice mandate audi alteram partem principle. Even when authorities have reasons to believe credit ineligible, pre-decisional hearing must be provided. Post-decisional hearing or notice for document production after blocking is insufficient - Prima facie blocking order appears to have merit based on non-existent suppliers but procedural defect of not providing pre-decisional hearing vitiates the order – The impugned order is set aside. The petitioner is directed to file a detailed representation demonstrating bonafide of suppliers and justifying ITC claimed. The Respondents to consider representation and pass reasoned speaking order – The petition is disposed of
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