Facts of the Case

The petitioner, Abhishek Goyal, an active business concern registered under the Punjab Goods and Services Tax Act, 2017 with GSTIN 03KNXPK6124H2ZJ, challenged the blocking of his Electronic Credit Ledger (ECL) by the respondents on 12.06.2025, 02.09.2025 and 03.10.2025 under Rule 86A of the GST Rules, without any prior intimation or notice, resulting in a negative balance being reflected in the ECL.

Issues Involved

  1. Whether Rule 86A of the CGST/PGST Rules, 2017 permits the Commissioner or an authorised officer to block a taxpayer's Electronic Credit Ledger by an amount exceeding the credit actually available in the ledger at the time of the blocking order.

Petitioner's Arguments

  • Rule 86A does not authorise blocking of ITC in excess of what is actually available in the taxpayer's ECL; creating an artificial negative balance disables the taxpayer from utilising even the remaining, unblocked ITC.
  • Reliance was placed on Samay Alloys India Pvt. Ltd. (Gujarat HC), Best Crop Science Pvt. Ltd., Kings Security Guard Services and Karuna Rajendra Ringshia (Delhi HC) — the latter two upheld by the Supreme Court on SLP dismissal — and on the Punjab and Haryana High Court's own decision dated 04.11.2025 in CWP-23675-2025 (M/s Shyam Sunder Strips vs Union of India), squarely covering the issue in the petitioner's favour.

Respondent's Arguments

  • The respondents opposed the petition but were unable to deny that the issue stood squarely covered against the Department by the decision in M/s Shyam Sunder Strips and connected matters.

Court Order / Findings

  • The Division Bench extensively reproduced the reasoning in Shyam Sunder Strips, which endorsed the views of the Gujarat, Delhi, Telangana and Bombay High Courts and held that availability of credit in the Electronic Credit Ledger is a condition precedent for exercise of power under Rule 86A; if no ITC is available in the ledger, blocking it and inserting a negative balance is wholly without jurisdiction and illegal.
  • The Court noted the primary conditions for invoking Rule 86A — credit must be available in the ECL, and the officer must record reasons to believe it was fraudulently availed or is ineligible — and that the rule does not authorise the officer to make debit entries creating a negative balance, since permanent recovery of wrongly availed ITC is governed by Sections 73/74 of the CGST Act.
  • Following Shyam Sunder Strips, the impugned blocking entries were set aside to the extent they disallowed debit from the ECL in excess of ITC actually available at the time of the decision, with liberty to the respondents to pursue statutory recovery remedies.

Important Clarification

  • Rule 86A of the CGST/State GST Rules can only restrict debit from an Electronic Credit Ledger to the extent of ITC actually available in it at the time of invocation; it cannot be used to create an artificial negative balance exceeding the available credit, since it is a temporary, provisional safeguard and not a substitute for recovery proceedings under Sections 73 or 74 of the CGST Act.
  • Prior notice is not required to invoke Rule 86A given its emergent, preventive character, but the rule's application remains strictly confined to the credit actually standing in the ledger.

Sections Involved

  • Rule 86A, Central Goods and Services Tax Rules, 2017 / Punjab GST Rules, 2017 — conditions for restricting use of amount available in the Electronic Credit Ledger.
  • Sections 73 and 74, CGST Act, 2017 — the statutory recovery mechanism for wrongly availed or utilised ITC, distinguished from the provisional remedy under Rule 86A.

Decision – In Favour of

In favour of the Assessee — the negative blocking of the ECL beyond available ITC was set aside, with liberty to the Department to pursue statutory recovery.

Case Details

Court: High Court of Punjab and Haryana at Chandigarh
Case No.: CWP-32690-2025
Coram: Hon'ble Mrs. Justice Lisa Gill and Hon'ble Mrs. Justice Meenakshi I. Mehta
Date of Order: 21.11.2025

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