Rule 86A of CGST Rules, 2017— Blocking of ITC – The applicants prayed for directions to the Respondents to withdraw the negative block of the electronic credit ledger. The petitioner submitted that when they attempted to file their return for the month of September, 2021, there was no credit balance in the electronic credit ledger. Despite the same, the portal displayed a message that the electronic credit ledger had been blocked by the respondent No.2 and a negative balance had been entered in their electronic ledger. The applicants requested the respondent on 22nd October, 2021. The counsel for the applicants submitted that the negative block of electronic credit ledger with Nil balance in the credit ledger as on the date of the imposition of the block is wholly without jurisdiction and beyond the scope of Rule 86-A of the GST Rules. The court observed that the condition precedent for exercise of power under Rule 86A is the availability of credit in the electronic credit ledger which is alleged to be ineligible. If credit balance is available, then the authority may, for reasons to be recorded in writing, not allow the debit of amount equivalent to such credit. However, there is no power of negative block for credit to be availed in future.

Held that:- The Hon’ble High Court directed the respondent to withdraw negative block of the electronic credit ledger at the earliest. Further directed that the writ applicants are also entitled to the refund of Rs.20 Lakh deposited by them to enable them to file their return. The respondents shall refund this amount of Rs.20 Lakh to the writ applicants within a period of two weeks.