Patna High Court
M/S Graphic Trades Private Limited vs The State Of Bihar on 23 April, 2025
Author: Rajeev Ranjan Prasad
Bench: Rajeev Ranjan Prasad, Ashok Kumar Pandey
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.4506 of 2025
======================================================
M/s Graphic Trades Private Limited a company registered under the
provisions of the Companies Act, 2013, having its registered office at C-15/B,
Basawan Park Lane, Boring Canal Road, Patna-800001 through one of its
directors, namely, Dilip Kumar, aged about 48 years, Male, son of Late
Kameshwar Prasad, Resident of Ashiyana Nagar, P.S. Rajiv Nagar, District-
Patna. ... ... Petitioner
Versus
1. The State of Bihar through the Principal Secretary-cum-Commissioner,
Department of State Taxes, Government of Bihar, Patna.
2. The Principal Secretary-cum-Commissioner, Department of State Taxes,
Government of Bihar, Patna.
3. The Additional Commissioner of State Tax, Bihar, Patna.
4. The Joint Commissioner of State Taxes, Kadam Kuan Circle, Patna.
... ... Respondents
======================================================
Appearance :
For the Petitioner/s : Mr. Vishal Agrawal, Advocate (Online)
Mr. Gaurav Govinda, Advocate
Ms. Ananya Maitin, Advocate (Online
For the Respondent/s : Mr. Vikash Kumar, Standing Counsel-11
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE ASHOK KUMAR PANDEY
CAV JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 23-04-2025
This writ application has been preferred for the
following reliefs:-
"(i) For quashing and setting aside the Order
bearing Reference No. A. Bureau (ITC) -17-38/24
(Khand-3)/198 /Patna dated 07.02.2025
[Impugned Order] issued under the signature of
Respondent No. 3 being the Additional
Commissioner of State Tax, Bihar, Patna,
whereby he has directed the Respondent No.4 to
block the Input Tax Credit of the Petitioner to the
tune of Rs. 1,18,41,455/- in terms of Rule 86A(1)
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
2/20
(a) of the Bihar Goods & Service Tax Rules, 2017
(hereinafter referred as 'BGST Rules, 2017'), and
to further take legal action against the Petitioner;
(ii) For issuance of appropriate writ/s and/or
direction/s upon the Respondent No. 3 & 4 to
unblock the Input Tax Credit (hereinafter referred
to as "ITC") lying in the Electronic Credit Ledger
of the Petitioner amounting to Rs. 1,18,41,455/-;
(iii) For a declaration that the arbitrary exercise of
power of blocking the electronic credit ledger
under Rule 86A of the BGST Rules, 2017 could
not have been exercised by the Respondent No. 3
& 4 in the facts of the present case against the
Petitioner, inasmuch as there is no independent
application of mind and consequently there exists
no reason to believe which warrant the
Respondent No.3 and 4 to have invoked the
power granted to it under Rule 86A of the BGST
Rules, and where under no reasons whatsoever
have been provided by the Respondent No.3 in its
Order dated 07.02.2025 for blocking the ITC, and
thus the same may be ordered to be vacated;
(iv) For a declaration that since the Respondent
No. 3 and 4 have not complied with the
requirements Rule 86A of the BGST Rules, 2017,
the action of the Respondent is wholly arbitrary,
discriminatory and violative of Article 265 of the
Constitution of India, and therefore direct the
Respondent No.3 to unblock the Electronic Credit
Ledger of the Petitioner;
(v) For issuance of appropriate writ/s, and/or
direction/s upon the Respondents restraining them
from taking any adverse action or coercive steps
against the Petitioner pending this present
petition;
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
3/20
(vi) For issuance of appropriate writ/s, and/or
direction/s upon the Respondents restraining them
from taking any adverse action or coercive steps
against the Petitioner pending this present
petition, and for ad interim stay on the operation
and effect of the Order dated 07.02.2025 and the
action taken pursuant to the said Order of
blocking the ITC balance in the ledger to the tune
of 1,18,41,455/-; And/or
(vii) For any other relief or reliefs that the
Petitioner may be found entitled to in the facts
and circumstances of the present case."
Brief Facts of the Case
2. It is the case of the petitioner that the petitioner
company is engaged in business of providing end to end solutions
in the field of Information Technology. It procures goods and
services from third party vendors across the country, on payment
of applicable Goods and Services Tax (hereinafter referred to as
the 'GST') i.e. the input tax on the purchase of goods/services in
course of furtherance of its business. It is stated that in terms of
Section 16 of the Bihar Goods and Services Tax (hereinafter
referred to as the 'BGST'), the petitioner is entitled to take credit
of such input tax charged on the supply of goods/services and
utilize the Input Tax Credit (hereinafter referred to as the 'ITC') in
adjusting its output tax liabilities.
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
4/20
3. It would appear from the reliefs prayed in the writ
application that the petitioner has challenged only Annexure 'P/2'
issued by the Additional Commissioner State Taxes, Central
Investigation Bureau, Bihar (respondent no. 3) regarding the
search carried out at the principal place of business of M/s TDML
Services Private Limited at 13/12, Chinar Park, Clubtown
Gateway, Hatiara, New Town, North Twenty Four Parganas, West
Bengal, 700157. Respondent No. 3 informed the respondent no. 4
that after investigation the said entity was found non-existent at the
principal place of business. Respondent No. 3 directed respondent
no. 4 to take appropriate action against the petitioner who is in
the recipient's list of M/s TDML Services Private Limited and had
availed the benefit of input tax credit unlawfully. With the writ
application the decision of the respondent no. 4 has not been
enclosed and it is not specifically under challenge but a direction
has been sought for against respondent nos. 3 and 4 to unblock the
ITC lying in the Electronic Credit Ledger (hereinafter referred to
as the 'ECrL') of the petitioner amounting to Rs. 1,18,42,455/-.
Stand of the petitioner
4. Learned counsel for the petitioner has submitted that
the order as contained in Annexure-P/2 which is the basis of
blocking of credit has been issued by the Additional Commissioner
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
5/20
State Taxes, Central Investigation Bureau, Bihar vide Memo No.
198 dated 07.02.2025.
5. It is submitted that the impugned communication
(Annexure 'P/2') has been issued by respondent no. 3 and
pursuant thereto respondent no. 4 has blocked the ITC to the tune
of Rs. 1,18,41,455/-.
6. Learned counsel submits that on a bare reading of
Rule 86A of the Bihar Goods Services Tax Rules, 2017
(hereinafter referred to as the 'BGST Rules of 2017')/Central
Government Goods Services Tax Rules (hereinafter referred to as
the 'CGST') it would appear that it mandates recording of
reasons. Relying upon the judicial pronouncements on the subject
in the case of Samay Alloys India Pvt. Ltd. vs. State of Gujarat
reported in [2022 (61) G.S.T.L. 421 (Guj.)] and Dee Vee Projects
Ltd. Vs. The Government of Maharashtra & Ors. reported in
[2022(2) TMI 569], learned counsel submits that in both the cases
the Hon'ble High Court of Gujarat and High Court of Bombay
have held it mandatory upon the invoking Rule 86A to record the
reasons and the power of disallowing debit of amount from ECrL
should not be exercised in a mechanical manner.
7. Learned counsel submits that respondent no. 4 has
not conducted any independent investigation into the matter before
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
6/20
blocking of ITC to the tune of Rs. 1,18,41,455/- which is wholly
unsustainable in the eye of law.
Stand of the State
8. The writ application has been contested by learned
counsel for the State. Mr. Vikash Kumar, learned Standing Counsel
No. 11 has submitted that the petitioner is registered with
Kadamkuan Circle of Commercial Taxes Department, Bihar. The
letter as contained in Annexure 'P/2' has been issued by the
Investigation Bureau, Bihar, Patna informing the Circle-in-Charge,
Kadamkuan Circle that the petitioner firm had received huge input
tax credit from a firm namely, TDML Services P. Ltd which has
been found non-existent at its registered place of business at
Kolkata, West Bengal. On being satisfied that the petitioner firm
had received huge input tax credit from a non-existent firm at
Kolkata, the respondent Joint Commissioner, Kadamakuan Circle
has blocked the input tax credit of the petitioner relatable to the
aforesaid non-existent firm.
9. Learned counsel submits that the petitioner has filed
this writ application circumventing the alternative remedy
available to him. In this connection, learned SC 11 has relied upon
the Guidelines for disallowing debit of electronic credit ledger
under Rule 86A of the CGST Rules, 2017 contained in CBEC-
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
7/20
20/16/05/2021
-GST, Government of India, Ministry of Finance,
Department of Revenue, Central Board of Indirect Taxes and
Customs GST Wing on 2nd November, 2021. It is submitted that
the procedure for disallowing debit of Electronic Credit Ledger
and the remedy against the same have been duly provided in the
Guidelines. The petitioner has remedy available to make a
submissions before the Authorized Officer/Commissioner with
material evidence and he may request the authority to examine the
matter afresh. It is submitted that on being satisfied that the input
tax credit, initially considered to be fraudulently availed or
ineligible as per conditions of sub-rule (1) of Rule 86A and the
same is not no more ineligible or wrongly availed, either partially
or fully, the authority may allow the use of credit.
10. Learned counsel submits that Rule 86A was inserted
in CGST/BGST Rules empowering the competent authority to
block input tax credit if the authority has reason to believe that
input tax credit has been fraudulently availed by the tax payer.
11. In this case, the Joint Commissioner, Anti-Evasion
Unit, CGST and Central Excise, Kolkata North Commissionerate
had issued a Circular under cover of its letter bearing no.
GEXCOMAF/AE/1017/2024-AE-O/o Pr. Cmmr. CGST-Kolkata
(N) 830/849 dated 16.01.2025 to the respondent no. 3 informing
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
8/20
inter alia that the investigation undertaken by it had revealed that
one M/s TDML Services Private Limited was found non-existent
at its principal place of business at Kolkata and had passed on fake
input tax credit to its purported recipients without any actual
supply of goods.
12. Learned counsel submit that the blocking of input
tax credit is in accordance with law and it has only temporary
measure effective for a year only. The final outcome depends on
further investigation of the matter.
13. Learned counsel further submits that the petitioner
has taken a plea in the writ petition that the letter dated 07.02.2025
does not put DIN (Document Identification Number), therefore, it
is in violation of law. This issue has not been raised by learned
counsel for the petitioner in course of his submissions but for the
sake of clarity, it is submitted that the system of putting DIN has
been adopted by the Central Tax Authorities vide Circular No.
128/47/2047 dated 23.12.19. No such system has yet been
implemented by the State Government. The Central Tax Circular
is binding on the Central Tax Authorities only and not on the State
Tax Authorities unless the Circular is adopted by the State as well.
In this regard, learned counsel relied upon the judgment of
Hon’ble Orissa High Court in the case of Atulya Minerals Vs.
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
9/20
Commissioner of State Tax passed in W.P. (C) No. 14540 of
2024.
14. Learned Standing Counsel has pointed out that Rule
86A (1) does not mandate a pre-decisional hearing at the initial
stage of blocking of the input tax credit. He has drawn the
attention of this Court towards paragraph 35 of the Division Bench
judgment of the Hon’ble High Court of Bombay in the case of Dee
Vee Projects Ltd. (supra). The Hon’ble Division Bench has held
that the post-decisional and remedial hearing is required to be
granted to the person affected by blocking of his input tax credit. It
is his submission that the guidelines referred above provides for
post jurisdictional hearing which the petitioner may avail.
Consideration
15. We have heard learned counsel for the petitioner as
well as learned Standing Counsel No. 11 for the State. Annexure-
P/2 which is the communication addressed by the Additional
Commissioner State Taxes, Central Investigation Bureau, Bihar to
the Joint Commissioner State Taxes, Kadamkuan Circle, Patna
lays down the foundation of this case. We reproduce the Annexure
‘P/2’ hereunder for a ready reference:-
fcgkj ljdkj
okf.kT;&dj foHkkx
¼dsUnzh; vUos”k.k C;wjks] dj Hkou] f}rh; ry] ohjpan iVsy iFk] iVukA½
i=kad %& v0C;wjks¼ITC½&17&38@24¼[k.M&3½ 198 ¼vuq0½ @iVuk] fnukad & 07-02-25
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
10/20izs’kd]
jkT; &dj vij vk;qDr]
dsUnzh; vUos”k.k C;wjks] fcgkj] iVukAlsok esa]
jkT;&dj la;qDr vk;qDr ¼izHkkjh½]
dnedqvk¡ vapy] iVukAfo’k; %& vfLrRoghu izfr’Bku Tdml Services Private Limited,
GSTIN: 19AAHCT3493NIZJ ds Recipient izfr’Bku ds fo:) eky ,oa
lsok dj vf/kfu;e] 2017 dh lqlaxr /kkjkvksa ds varxZr fof/klEer dkjZokbZ djus ds
laca/k esAegk”k;]
mi;qZDr fo’k;d Joint Commissioner, CGST & CX, Kolkata
North Commissionerate dk i= i=kad GEXCOM/AE/1017/2024-AE-
O/o Pr Commr-CGST-Kolkata(N)/ 830-849 fnukad 16-01-2025 ds ek/;e
ls Alert Circular No. 04/KOL-N/2025 izkIr gqvk gSA i= ds ek/;e ls lwfpr
fd;k x;k gS fd %&
Anti-evasion Unit, CGST & CX, Kolkata North
Commissionerate ds inkf/kdkfj;ksa }kjk eky ,oa lsok dj vf/kfu;e] 2017
dh /kkjk 67¼2½ ds rgr izfr’Bku Tdml Services Private Limited,
GSTIN: 19AAHCT3493NIZJ ds eq[; O;olkf;d LFky (Principal
Place of Business-13/12, chinar Park, Clubtown Gateway,
Hatiara, New Town, North Twenty Four Parganas, West Bengal,
700157 ) ij search operation lapkfyr fd;k x;kA
tk¡pksijkUr mDr izfr’Bku vius O;olkf;d LFky ij vfLrRoghu (Non-
existent) ik;k x;kA
mDr vfLrRoghu izfr’Bku Tdml Services Private Limited, GSTIN:
19AAHCT3493NIZJ }kjk fcgkj jkT;&{ks=kf/kdkjh esa fucaf/kr 01 izfr’Bku
dks vuqfpr@vekU; ITC dk ykHk igq¡pk;k x;k gS] tks fuEu rkfydk *d* esa
of.kZr gS%&
(Recipient’s List of TDML SERVICES PRIVATE LIMITED, GSTIN: 19AAHCT3493NIZJ)
Trade Name GSTIN Taxable Value IGST Circle
(Division)/Jurisdiction
Graphic Trades Private 10AADCE9153C1Z6 6,57,85,859.00 1,18,41,455.00 Kadam Kuan (Patna
Limited East)/SGST
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
11/20funs’kkuqlkj izkIr i= dh izfr ¼vuqyXud lfgr½ layXu djrs gq, vuqjks/k gS fd
mijksDr rkfydk esa of.kZr Recipient izfr’Bku ds ekeys esa eky ,oa lsok dj
vf/kfu;e] 2017 ds fu;e 86A(1)(a) ds rgr ITC block djrs gq, rFkk
fu;ekuqlkj fof/klEer dkjZokbZ djrs gq, QykQy ls v/kksgLrk{kjh dks ;Fkk”kh?kz
voxr djkuk lqfuf”pr fd;k tk;Avuq0&;FkksDr fo”oklHkktu
g0@&
jkT;&dj vij vk;qDr
dsUznh; vUos”k.k C;wjks] iVukA
16. Learned counsel relies on the screenshot taken from
computer enclosed with a separate paperbook supplied at the time
of argument. However, this decision of Respondent No. 4 has not
been specifically challenged by amending the writ petition.
17. With the counter affidavit of the State, the report of
the Inspector Anti Evasion, CGST & CX, Kolkata North
Commissionerate dated 17.12.2024 has been enclosed to
substantiate the stand of respondent no. 3. The report as enclosed
with the counter affidavit shows that during the search conducted
by the authorities of the CGST & CX no document related to M/s
TDML Services was found. One Sri Sharma was summoned
against which he gave a voluntary statement wherein he stated that
he was never head of any company by the name of TDML
Services. Since no document pertaining to M/s TDML Services
was found, no seizure was made. Search operation was conducted
and concluded on 17.12.2024 at 7:00 pm.
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
12/20
18. In the kind of materials which were collected by the
CGST & CX, office of the Principal Commissioner of Central
Taxes, Kolkata North an Alert Circular No. 04/Kol-N/2025 – 849
dated 16th January 2025 was issued (Annexure- R/2/2). The Alert
Circular states that on the basis of information a search was
conducted by the officers of the Headquarter of Anti Evasion Unit
CGST & CX , Kolkata at the principal place of business of M/s
TDML Services Private Limited. The entity was found non-existent
at their principal place of business (PPOB). During the search it
was noticed that M/s TDML Services Private Limited is non-
existent on the said premises and the said premises is used by
another company. The entity availed huge amount of irregular ITC
from the suppliers and passed on irregular ITC to their recipients
without underlying supply of goods or services or both as revealed
from the analysis of their filed GSTR-1 and auto populated GSTR
-2A. It further states that “it can be construed without any doubt
that this entity issued invoices fraudulently only to pass on illegal
benefit of ITC to the recipients of fake invoices. Accordingly all
concerned authorities are hereby alerted to take notice of the same
and the irregular ITC as availed (which may increase upon
investigation) by the recipients are required to be
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
13/20
denied/disallowed along with applicable interest and penalty as per
law….”
19. In the background of the above mentioned materials
which came to the notice of the respondent no. 3, the respondent
no. 3 has taken an interim decision to block the ITC of the
petitioner to the extent of Rs. 1,18,41,455/-. Rule 86A (1) of the
CGST/BGST Rules of 2017 reads as under:-
“Rule 86-A. Conditions of use of amount available
in electronic credit ledger. –
(1) The Commissioner or an officer authorised by
him in this behalf, not below the rank of an Assistant
Commissioner, having reasons to believe that credit
of input tax available in the electronic credit ledger
has been fraudulently availed or is ineligible in as
much as-
(a) the credit of input tax has been availed on the
strength of tax invoices or debit notes or any other
document prescribed under rule 36-
(i) issued by a registered person who has been found
non-existent or not to be conducting any business
from any place for which registration has been
obtained; or
(ii) without receipt of goods or services or both; or
(b) the credit of input tax has been availed on the
strength of tax invoices or debit notes or any other
document prescribed under rule 36 in respect of any
supply, the tax charged in respect of which has not
been paid to the Government; or
(c) the registered person availing the credit of input
tax has been found non-existent or not to be
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
14/20conducting any business from any place for which
registration has been obtained; or
(d) the registered person availing any credit of input
tax is not in possession of a tax invoice or debit note
or any other document prescribed under rule 36, may,
for reasons to be recorded in writing, not allow debit
of an amount equivalent to such credit in electronic
credit ledger for discharge of any liability under
Section 49 or for claim of any refund of any
unutilised amount.”
20. It is evident on a bare reading of the Rule 86A (1)
that the Commissioner or an officer authorized by him not below
the rank of Assistant Commissioner having reasons to believe that
credit of input tax available in the Electronic Credit Ledger has
been fraudulently availed or ineligible, can proceed to pass an
order blocking the ITC to the said extent. The Joint Commissioner
(respondent no. 4) has ultimately blocked the input tax credit to the
extent indicated hereinabove.
21. Learned counsel for the petitioner has stated that as
regards the pre-decisional hearing at the interim stage, there are
divergent views of the different High Courts, however, learned
counsel has given much emphasis on his submission that there
must be “reason to believe” and such reasons should be recorded
in writing. It is his submission that in the present case since
respondent no. 4 has not applied his independent mind and has
proceeded to pass the interim order on the basis of directions issued
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
15/20
by the respondent no. 3, the respondent no. 4 has thus, not at all
complied with the requirements of prescribing reasons to believe.
This Court would, however, not accept this submission of the
learned counsel for the petitioner on the face of the materials
available on the records.
22. In the case of Dee Vee Projects Pvt. Ltd. (supra),
the Hon’ble Division Bench of Bombay High Court has held that
power under Rule 86A is in fact a power to block ITC to the extent
stated and it is a drastic in nature. The Hon’ble High Court has held
that all the requirements of Rule 86A would have to be fully
complied with before the power thereunder is exercised. While
interpreting the words “must have reasons to believe”, the Hon’ble
Bombay High Court has recorded in para ’33’ inter alia as under:-
“33. It must be noted that the power under rule 86-
A which in effect is the power to block ECL to the
extent stated earlier is drastic in nature. It creates a
dissability for the tax payer to avail of the credit in
ECL for discharge of his tax liability, which he is
otherwise entitled to avail. Therefore, all the
requirements of rule 86-A would have to be fully
complied with before the power thereunder is
exercised. When this rule requires arriving at a
subjective satisfaction which is evident from the
use of words, “must have reasons to believe”, the
satisfaction must be reached on the basis of some
objective material available before the authority. It
cannot be made on the flights of ones fancies or
whims or imagination. The power under rule 86-A
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
16/20is an administrative power with quasi-judicial hues
exhibited in aforestated twin pre-requisites and has
civil consequences for a tax payer in the sense, it
acts as an obstruction to right of a tax payer to
utilise the credit available in his ECL. Any
administrative power having quasi-judicial shades,
which brings civil consequences for a person
against whom it is exercised, must answer the test
of reasonableness. It would mean that the power
must be exercised fairly and reasonably by
following the principles of natural justice.”
23. As regards following principles of natural justice,
the Hon’ble Bombay High Court has held in para ’35’ as under:-
“35. As regards the following of principles of
natural justice, the law is now well settled. In cases
involving civil consequences, these principles
would be required to be followed although, the
width, amplitude and extent of their applicability
may differ from case to case depending upon the
nature of the power to be exercised and the speed
with which the power is to be used. Usually, it
would suppose prior hearing before it’s exercise
(See Swadeshi Cotton Mills Vs. Union of India :
(1981) 1 SCC 664 and Nirma Industries Limited
and another Vs. Securities and Exchange Board of
India : (2013) 8 SCC 20). But, it is not necessary
that such prior hearing would be granted in each
and every case. Sometimes, the power may be
conferred to meet some urgency and in such a case
expedition would be the hallmark of the power. In
such a case, it would be practically impossible to
give prior notice or prior hearing and here the rule
of natural justice would expect that at least a post
decisional hearing or remedial hearing is granted so
that the damage done due to irrational exercise of
power, if any, can be removed before things get
worse. In Smt. Maneka Gandhi (supra), it was laid
down that where there is an emergent situation
requiring immediate action, giving of prior notice
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
17/20or opportunity to be heard may not be practicable
but a full remedial hearing would have to be
granted. The power conferred upon the
Commissioner under rule 86-A is one of such kind.
It has civil consequences though for a limited
period not exceeding one year and has an element
of urgency which perhaps explains why the rule
does not expressly speak of any show cause notice
or opportunity of hearing before the ECL is
blocked. Of course, in order to guard against
arbitrary exercise of power, the rule creates
certain checks which are found in the twin
requirements explained by us earlier. But, in
our view, that may not be enough, given the
nature of power, and what settled principles of
law tell us in the matter. They would, in such a
case, require this Court to read into the
provisions of rule 86-A something not
expressly stated therein, and so, we find that
post decisional or remedial hearing would have
to be granted to the person affected by blocking
of his ECL. We may add that such post
decisional hearing may be granted within a
reasonable period of time which may not be beyond
two weeks from the date of the order blocking the
ECL. After such hearing is granted, the authority
may proceed to confirm the order for such period
as may be permissible under the rule or revoke the
order, as the case may be.”
24. Regarding pre-requisite of recording of reasons in
writing, it is found that in the said case the impugned order was just
a two liner and it writes as follows:-
“Blocked by Shri/Mr/Ms Vrushali Sukumar Mandape,
Deputy Commissioners of State Tax, MIDC-Nagpur-502
Admn.State.”
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
18/20
25. In the aforesaid kind of the impugned order, the
Hon’ble Bombay High Court has held that “this order does not give
any reasons and therefore, there is no question of any reflection
therein of the authority passing the order on being satisfied about
the necessity of passing it.”
26. We are of the considered opinion that in the present
case the facts are otherwise. We have taken note of the Annexure
‘P/2’ and the report of the Inspector which has been brought on
record and those are the materials clearly indicating that the
respondent no. 3 had before him sufficient materials to satisfy
himself with regard to necessity of passing an order under Rule 86-
A(1) of the CGST/BGST Rules of 2017. Every case depends upon
its own facts.
27. Apart from the materials which we have have found,
we have noticed clause 3.4 of the guidelines issued by the Central
Board of Indirect Taxes and Customs. Paragraph 3.4 is quoted
hereunder for a ready reference:-
“3.4 Allowing debit of disallowed/restricted credit
under sub-rule (2) of Rule 86A:-
3.4.1 The commissioner or the authorized officer,
as the case may be, either on his own or based on
the submissions made by the taxpayer with
material evidence thereol, may examine the matter
afresh and on being satisfied that the input tax
credit, initially considered to be fraudulently
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
19/20availed or ineligible as per conditions of sub-rule
(l) of rule 86A, is no more ineligible or wrongly
availed, either partially or fully, may allow the use
of the credit’ so disallowed/restricted, up to the
extent of eligibility, as per powers granted under
sub-rule (2) of rule 864. Reasons for allowing the
debit of electronic credit ledger, which had been
earlier disallowed, shall be duly recorded on file
in writing, before allowing such debit of
electronic credit ledger.
3.4.2 The restriction imposed as per sub-rule ( I )
of rule 86A shall cease to have effect after the
expiry of a period of one year from the date of
imposing such restriction. In other words, upon
expiry of one year from the date of restriction, the
registered person would be able to debit input tax
credit so disallowed, subject to any other action
that may be taken against the registered person.
3.4.3 As the restriction on debit of electronic
credit ledger under sub-rule (l) of rule 86A is
resorted to protect the interests of the revenue and
the said action also has bearing on the working
capital of the registered person, it should be
endeavored that in all such cases’ the investigation
and adjudication are completed at the earliest,
well within the period of restriction, so that the
due liability arising out of the same can be
recovered from the said taxable person and the
purpose of disallowing debit from electronic
credit ledger is achieved.”
Patna High Court CWJC No.4506 of 2025 dt.23-04-2025
20/20
28. In the facts of the present case, we are of the considered
opinion that no illegality or infirmity may be found with the impugned
order (Annexure ‘P/2’) which is in the nature of an interim measure
taken by respondent no. 3. The respondent no. 4 has acted on the basis of
of Annexure ‘P/2’, however, the order, if any of respondent no. 4 is not
under challenge specifically. The petitioner has a remedy available
against the blocking of ITC. If so advised, the petitioner may avail it’s
remedy in terms of paragraph 3.4 of the guidelines. If any such request
is made by the petitioner, the respondent no. 4 shall consider the same as
expeditiously as possible and pass a reasoned order after hearing the
petitioner/its authorized representative.
29. It is made clear that this Court has not gone into the
merit of the case and respondent no. 4 shall consider the entire matter
afresh, if petitioner makes an appropriate request in this regard.
30. All contentions are left open.
31. This writ application stands disposed of accordingly.
(Rajeev Ranjan Prasad, J)
( Ashok Kumar Pandey, J)
Sushma2/-
AFR/NAFR AFR CAV DATE 22.04.2025 Uploading Date 22.04.2025 Transmission Date