HC Sets Aside ECL Blocking Without ITC Balance Under Rule 86A

Centax Editorial Board

February 23, 2026

• 2 min. read

Case Details: S.P.L. Motors Pvt. Ltd. vs. Union of India (2026) 39 Centax 147 (P&amp;H.)

Judiciary and Counsel Details

Lisa Gill & Parmod Goyal, JJ.
S/Shri Sandeep Goyal, Sr. Adv. & Rishab Singla, Adv., for the Petitioner.
Ms Sharmila Sharma, Adv., for the Respondent.

Facts of the Case

The petitioner was an active business concern registered under the provisions of the CGST Act. On 29-04-2024, the petitioner’s Electronic Credit Ledger (ECL) was blocked by the proper officer. It was stated that the ITC was blocked in negative by the respondents, in violation of the provisions of Rule 86A of the CGST Act.

CESTAT Held

The Punjab & Haryana High Court held that the plain language of Rule 86A permits only the temporary non-debit of available ITC upon reasons to believe fraudulent or ineligible credit. The provision does not mandate or authorise blocking ITC in excess of the ITC already available to the credit of the registered dealer in its ECL. It is always open to the authorities to resort to statutory measures available for recovery of the amount. Whether input tax credit was wrongly availed or utilised would be determined by the competent authority in terms of Sections 73 and 74 of the CGST Act. Therefore, without availability of credit in the ECL, there cannot be negative blocking. The negative blocking was impermissible. The authorities could withhold only ITC available and for any excess must resort to statutory recovery mechanisms. The orders or entries disallowing debit in excess of available ITC were unsustainable and were to be set aside.