Order Date – 01 October 2024

Parties: M/S Prince Steel Vs State of Karnataka and The Assistant Commissioner of Commercial Taxes

Facts –

• The Petitioner’s, M/S Prince Steel, Electronic credit ledger was blocked by invoking Rule 86A of the Central Goods and Services Tax Rules, 2017.
• It was alleged that before passing the impugned order, pre-decisional hearing was not provided to the petitioner nor does the impugned order contain any reason to believe as to why it was necessary to block the Electronic credit ledger.

Issue –

• Whether the blocking of Electronic credit ledger by invoking Rule 86A is proper?

Order –

• The Single bench of Hon’ble High Court observed that in the instant case, since no pre-decisional hearing was provided/granted by the respondents before passing the impugned order, coupled with the fact that the impugned order invoking Section 86A of the CGST Rules by blocking of the Electronic credit ledger of the petitioner does not contain independent or cogent reasons to believe except by placing reliance upon the reports of Enforcement authority which is impermissible in law, since the same is on borrowed satisfaction as held by the Hon’ble Division Bench of this Court in the case of K-9-Enterprises Vs. State of Karnataka, the impugned order deserves to be quashed.
• Further Liberty is reserved in favour of the respondents to proceed against the petitioner in accordance with law and in terms of the judgment of Division Bench in K-9-  Enterprises Vs. State of Karnataka