Legal Document View

Unlock Advanced Research with PRISMAI

- Know your Kanoon - Doc Gen Hub - Counter Argument - Case Predict AI - Talk with IK Doc - ...
Upgrade to Premium
[Cites 6, Cited by 0]

Bombay High Court

M/S Elitecon International Ltd Throu. ... vs Union Of India Throu. The Sec. Ministry ... on 25 March, 2026

Author: G. S. Kulkarni

Bench: G. S. Kulkarni

      2026:BHC-AS:18524-DB                                                                            9 WP 4899-25.DOC


LAXMI
SUBHASH
SONTAKKE
                                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed
                                            CIVIL APPELLATE JURISDICTION
by LAXMI
SUBHASH
SONTAKKE
Date: 2026.04.20
18:27:22 +0530
                                                WRIT PETITION NO. 4899 OF 2025


                   M/s. Elitecon International Ltd.                                                  ...Petitioner
                         Versus
                   Union of India & Ors.                                                    ...Respondents
                                                   _______
                   Dr. Sujay Kantawala a/w Anupam Dighe, Chandni Tanna, Renita Alex i/b. India
                   Law Alliance for Petitioner.
                   Mrs. S. D. Vyas, Addl.G.P. a/w A. R. Deolekar, AGP for Respondent No.2 & 3.
                   Mr. Jitendra Mishra a/w Sangeeta Yadav & Rupesh Dubey for Respondent Nos. 1,
                   4 & 5.


                                                               _______

                                                            CORAM:         G. S. KULKARNI &
                                                                           AARTI SATHE, JJ.

                                                            DATE:          25th MARCH 2026

                   Oral Judgment (Per Aarti Sathe J):-

                   1.               Rule. Rule made returnable forthwith. With the consent of the parties,

                   heard finally.


                   2.               This Petition under Article 226 of the Constitution of India is filed

                   praying for the following substantive reliefs: -


                               "a) That this Hon'ble Court may be pleased to issue a Writ of
                               Certiorari or Writ in the nature of Certiorari or any other appropriate
                               Writ, Order or Direction calling for records and proceedings dealing
                               with:-

                               i. the Impugned Provisional Attachment Orders dated 27.02.2025
                               issued by Respondent No. 2 vide FORM GST DRC 22 of the bank
                               accounts bearing Nos. 40963536902 and 921020036455317 held
                               with Respondent No. 6 and 7 respectively (Exhibit K-K1);


                                                           Page 1 of 13
                   Laxmi


                           ::: Uploaded on - 20/04/2026                          ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                   9 WP 4899-25.DOC



            ii. the Impugned Intimation Letter dated 27.02.2025 issued by
            Respondent No. 3(Exhibit J);

            iii. the Impugned Intimation/Communication Letter dated
            13.03.2025 and 31.03.2025 issued by the Respondent No. 4
            (Exhibit R & U respectively);

            and after going into the legality, propriety, and validity thereof, to
            quash and set aside (i), (ii) & (iii) as mentioned above;

            b) That this Hon'ble Court be pleased to issue a Writ of Mandamus
            or Writ in the nature of Mandamus or any other appropriate Writ,
            Order or Direction directing Respondents, their servants,
            subordinates and agents:

            i. to defreeze the Petitioner's Bank accounts bearing Nos.
            40963536902 and 921020036455317 maintained with
            Respondent No. 6 and 7 respectively;

            ii. to withdraw the Intimation Letter dated 27.02.2025 issued by
            Respondent No. 3(Exhibit J);

            iii. to unblock the Petitioner's ECL           vide    reference    no.
            BL2703250000079 dated 07.03.2025;

            iv. to withdraw the Intimation/Communication Letter dated
            13.03.2025 and 31.03.2025 issued by Respondent No. 4 (Exhibit R
            & U respectively);

            c) That pending the hearing and final disposal of the Petition, the
            Respondents by themselves and their subordinates, servants and
            agents be directed by an interim order of this Hon'ble Court:

            i. to defreeze the Petitioner's Bank accounts bearing Nos.
            40963536902 and 921020036455317 maintained with
            Respondent No. 6 and 7 respectively;

            ii. to withdraw the Intimation Letter dated 27.02.2025 issued by
            Respondent No. 3(Exhibit J);

            iii. to unblock the Petitioner's ECL           vide    reference    no.
            BL2703250000079 dated 07.03.2025;

            iv. to withdraw the Intimation/Communication Letter dated
            13.03.2025 and 31.03.2025 issued by Respondent No. 4 (Exhibit R
            & U respectively);"



3.               The primary grievance of the Petitioner is to the actions of Respondent

Nos. 2 and 3 in provisionally attaching the Petitioner's bank account under Section


                                        Page 2 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                         ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                  9 WP 4899-25.DOC



83 of the Maharashtra Goods and Services Tax Act, 2017 (hereinafter referred to

as the "MGST Act") held with Respondent Nos. 6 and 7 vide FORM GST DRC-


22 through orders dated 27th February 2025 (hereinafter referred to as the

"impugned attachment orders") as the same suffers from factual discrepancies. The

Petitioner is also challenging the illegal blocking of the Petitioner's Electronic

Credit Ledger (ECL), as Respondent No.4 has not assigned any reason before

blocking the Input Tax Credit (ITC) available in the ECL, as mandated under Rule

86A of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as

the "CGST Rules") and the guidelines issued by the CBIC (Central Board of

Indirect Taxes and Customs) circular nor has Respondent No. 4 given any hearing

to the Petitioner before blocking the ITC, in violation of the principles of natural

justice.


4.               It is the Petitioner's contention that Rule 86A(3) of the CGST Rules

mandates that the ITC which has been blocked in the ECL shall be unblocked on

the expiry of one year from the date of imposing such restrictions. In view thereof,

the Petitioner has submitted that the aforesaid issue is squarely covered by the

decisions of this Court in Seya Industries Ltd. Vs. State of Maharashtra 1, as also in

view of the order passed by this Court today in another Petition namely NZS

Traders Pvt. Ltd. Vs. Union of India and others2 and also by orders passed in M/s.

Armour          Security     (India)   Ltd.   Vs.   Commissioner,     CGST,       Delhi     East




1 (2024) 20 Centax 466 (Bom.)
2 Writ Petition No.4815 of 2024 on 25th March 2026


                                         Page 3 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                        ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                 9 WP 4899-25.DOC



Commissionerate & another3 and K-9 Enterprises Vs. State of Karnataka and

another4.


5.               The facts lie in a narrow compass, which are as follows:-


i.         On 12th February 2025, a search was initiated by Respondent No. 3 in the

Petitioner's premises, and thereafter on 13 th February 2025, Respondent No.3

issued summons to Mr. Vipin Sharma, Director of the Petitioner to record his

statement regarding the purchase and ITC availed from one M/s. Business Bay

Agencies.


ii.        On 17th February 2025, in response to the summons dated 13 th February

2025, Mr. Vipin Sharma sought for a short adjournment for medical reasons, and

thereafter on 25th February 2025, Mr. Vipin Sharma vide letter of even date

informed Respondent No. 3 of the ongoing Directorate General of Goods and

Services Tax Intelligence (DGGI), Nashik investigation since February 2022, and

requested that the present investigation be quashed as it was in respect of the same

issue for which the investigations were being carried out by Respondent No. 3.


iii.       On 27th February 2025, Respondent No. 3 vide letter of even date,

informed the Petitioner that ITC amounting to Rs. 54.09 crores had been accrued

from their suppliers, whose registration was cancelled during the period of 2022-

23 to 2024-25, and therefore it was requested to the Petitioner to make payment

of Rs. 52.46 crores of the alleged ineligible ITC. By a letter of even date,


3 SLP© No. 6092 of 2025
4 2024 (10) TMI 491


                                       Page 4 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                       ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                              9 WP 4899-25.DOC



Respondent No. 3 informed the Petitioner that in order to protect the government

revenue, there was a strong need to attach the Petitioner's bank account

maintained with Respondent No. 6 as ITC of Rs. 54,09,99,198/- was utilized

which was availed from suppliers whose GST registration had been cancelled.

Along with the aforesaid letter, Respondent No. 3 also issued FORM GST DRC-

22 to Respondent Nos. 6 and 7with respect to the bank account maintained with

them by the Petitioner.


iv.        On 8th March 2025, the Petitioner vide letter of even date addressed to the

Branch Manager of Respondent Nos. 6 and 7 sought confirmation regarding the

debit-freeze in the Petitioner's bank account and further on 11 th March 2025,

Respondent No. 3 issued summons to Mr. Vipin Sharma and Pravin Singh

regarding their purchases from M/s Business Bay Agencies.


v.         On 11th & 12th March 2025, ITC amounting to Rs. 13,75,52,871/- was

blocked in the Petitioner's ECL, hence the Petitioner vide letter dated 11 th March

2025 and email dated 12th March 2025 addressed to Respondent No. 4, requested

to provide the reasons for the blocking of the ITC amount and details of the

authority at whose behest the ITC had been blocked in the ECL. In response

thereto, Respondent No. 4, by letter dated 13 th March 2025, informed the

Petitioner that the ITC had been blocked with reference to the internal letter dated

27th February 2025 received from Respondent No. 2.


vi.        Thereafter, a series of correspondence was entered between the Petitioner

and the Respondents. The Petitioner by letter dated 24 th March 2025, informed



                                       Page 5 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                    ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                 9 WP 4899-25.DOC



Respondent No. 5 and the Chief Commissioner CGST, Nagpur Zone, that it was

still awaiting clarification on the 'reasons to believe' for the blocking of the ITC in

their ECL.


vii.       On 31st March 2025, the Petitioner was informed by Respondent Nos. 4

and 5 vide letter of even date that the "reasons to believe" were on the basis of

Respondent No. 2's internal letter dated 27th February 2025 to Respondent Nos. 4

and 5, on the basis of which the ITC had been blocked in the ECL of the

Petitioner.


viii.      It is in the backdrop of the above facts that the Petitioner is aggrieved by the

blocking of the ITC under Rule 86A and the consequent provisional attachment of

its bank accounts


6.               Learned Counsel Dr. Sujay Kantawala, along with Mr. Anupam Dighe,

Chandni Tanna, and Renita Alex appeared for the Petitioner. Mrs. S. D. Vyas,

learned Additional Government Pleader and Mr. A. R. Deolekar, learned

Additional Government Pleader appeared on behalf of Respondent Nos. 2 and 3,

and Mr. Jitendra Mishra, along with Mrs. Sangeeta Yadav & Mr. Rupesh Dubey

appeared on behalf of Respondent Nos. 1, 4, and 5. We have heard learned

Counsel for the parties and perused the papers and proceedings with the assistance

of the learned Counsel for the parties.


7.               Dr. Kantawala, learned Counsel for the Petitioner restricted his prayer

and submissions to the grievance regarding the blocking of ITC in the ECL on the

ground that the said blocking was contrary to the provisions of Rule 86A(3) of the


                                       Page 6 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                       ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                             9 WP 4899-25.DOC



CGST Rules, inasmuch as such blocking ceases to have effect after the expiry of

one year from the date of imposing of such blocking, as per the plain purport of the

said provision. He submitted that in the facts of the present case, the Petitioner's

ITC in the ECL ought to be unblocked as the period of one year expired on 7 th

March 2026, considering that the ITC was blocked on March 2025. He has also

submitted that the issue stands covered by the decisions in Seya Industries (supra),

Armour Security (India) Ltd. (supra), and K-9 Enterprises (supra) and that the

provisional attachment which has been made by Respondent No. 3 is without

jurisdiction, as per the provisions of Section 83(2) of the MGST Act and further

that the provisional attachment will also cease to have effect as period of one year

has expired on 27th February 2026.


8.               Dr. Kantawala, learned Counsel for the Petitioner further sought to

place reliance on the decision of the Supreme Court in Armour Security (India)

Ltd. (supra), wherein it has been held that when two proceedings which seek to

recover an identical tax liability from any particular contravention, the bar of

Section 6(2)(b) of the CGST Act would be attracted and hence in the facts of the

present case, Respondent No. 3 did not have any jurisdiction to make the

provisional attachment as the DGGI, Nashik had already initiated an investigation

into the same subject matter, i.e., ITC in respect of purchases made from M/s

Business Bay Agency. He further submitted that Respondent No. 4 blocked the

ITC on the basis of an internal letter issued by Respondent No. 2, and therefore

there was no independent application of mind on the part of Respondent No. 4 to

block the ITC in the ECL of the Petitioner. He further submitted that the 'reasons


                                       Page 7 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                   ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                        9 WP 4899-25.DOC



to believe' were not provided to the Petitioner, and no pre-decisional hearing was

held, which was a sine qua non prior to the blocking of the ITC under Rule 86A of

the CGST Rules. In this context, he sought to place reliance on the decision in the

case of K-9 Enterprises Vs. State of Karnataka & Anr. (supra).


9.               Per contra, learned Counsel for the Respondent opposed the prayers in

the present Petition to submit that the blocking of the ITC in the ECL of the

Petitioner had rightly been done by Respondent Nos. 4 and 5, and hence their

action could not be called into question. He submitted that there was no violation

of the provisions of Rule 86A of the CGST Rules, as the Respondents had

sufficient reasons to believe that ITC had been fraudulently availed insofar as the

Petitioner is concerned. He also sought to place reliance on the affidavit-in-reply

filed by one Mr. Sanjay Dnyandeo Pawar, Joint Commissioner of State Tax,

Investigation B, Mumbai on behalf of Respondent Nos. 2 and 3. The relevant

paragraphs of the said reply affidavit are reproduced below:


         4.     At the outset, it is submitted that the petitioner have approached this Hon'ble
         Court without exhausting the alternative, efficacious remedy available to him as per
         Rule 159(5) of the CGST/MGST Rules, 2017. It is submitted that Rule 159(5)
         provides that any person whose property is attached may file an objection in FORM
         GST DRC-22A to the effect that the property attached was or is not liable to
         attachment, and the Commissioner may, after affording an opportunity of being
         heard to the person filing the objection, release the said property by an order in
         FORM GST DRC - 23. The present Writ Petition is thus liable to be dismissed on
         this ground alone.

         5.      As regards the contention of the petitioner that a pre-decisional hearing was
         not granted to the petitioner before blocking the with the officer and subjective
         satisfaction of the officer should be 2017, it is submitted that Rule 86A empowers
         the GST officer to block utilisation of input tax credit when fraud is suspected. Two
         prerequisites are required to be fulfilled before invoking Rule 86A of CGST/MGST
         Rules. Firstly, Material evidence should be available the said property by an order in
         FORM GST DRC - 23. The present based on such material. Secondly, recording of
         reasons is a must before blocking electronic credit ledger. These two pre-conditions
         were fulfilled before the blocking of ITC by CGST officer. However, it is submitted



                                          Page 8 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                              ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                          9 WP 4899-25.DOC



         that said that the power under Rule 86A is drastic and entails serious civil
         consequences. As the there is no requirement of offering personal hearing before
         passing order, post-decisional or remedial hearing is always granted.

         7.      It is submitted that, the action taken by the respondents is just, legal and
         proper and there is no violation of the provisions of rule 86-A of GST Rules as
         alleged or otherwise. Respondent No. 3 had sufficient reasons to believe that credit
         of input tax available in the electronic credit ledger has been fraudulently availed or
         is ineligible.

         8.      it is submitted that, due to lack of facility for blocking ECL at the State
         Investigation Branch level, the inputs and recommendation were sent to the office of
         the Respondent No. 4 and 5 with a request for blocking of the said input tax credit.
         On receipt of inputs and recommendation, the Respondent No.4/5, after due
         consideration of the material facts, and having reasons to believe that the Petitioner
         has fraudulently and illegally availed of ITC, restricted the debit of the input tax
         credit by invoking the provisions of rule 86-A of the GST Rules. Similarly action of
         provisionally attaching petitioners bank account was taken after forming an opinion
         as mandated under section 83 of the CGST / MGST Act and following due process
         of law.

         9.     It is most respectfully submitted that the petitioner has nowhere in this
         petition contended or urged about genuineness of the transaction. It is submitted
         that the petitioner has approached the Hon'ble Court with unclean hands and has
         suppressed the information about the proceedings related to the impugned supplier.
         In view of the facts of the case and wrong availment of the input tax credit, the
         action of restricting the debit of the ITC from the Electronic Credit Ledger, to the
         extent of the ITC availed by petitioner from the supplier whose registration is
         cancelled ab initio, is legal and there is no violation of the provisions of rule 86-A of
         GST Rules.

         10. Further, it is submitted that, as the petitioner / Directors has not attended the
         ongoing investigation proceedings under GST Act till date; it is humbly prayed that
         this Hon'ble Court may direct petitioner to attend the investigation proceedings and
         provide necessary cooperation before the investigating authority or, as the case may
         be, the Respondent No.3.

10.              Having heard learned Counsel for the parties and having perused the

record, we are of the considered view that there appears to be much substance in

the submissions made on behalf of the Petitioner, that the blocking of ITC in the

ECL of the Petitioner beyond the period of one year is against the mandate of Rule

86A(3) of the CGST Rules. This is further clear from the very language of the

aforesaid Rule, which provides that the restriction as envisaged, of blocking of the

ITC will cease to have effect after expiry of the period of one year from the date of

imposing such restriction. Rule 86A (3) thus provides for an automatic unblocking


                                            Page 9 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                                ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                             9 WP 4899-25.DOC



of credit post the expiry of one year. In NZS Traders Pvt. Ltd. v/s Union of India

Ors.5, a similar issue had fallen for consideration of the Division Bench. When

considering the mandate of the said provision, the Court had held that there could

not have been blocking of the ITC beyond the period as envisaged by Rule 86A.

The relevant extracts of the said decision need to be noted:-


         "6. Having heard learned Counsel for the parties and having perused the record, we
         find much substance in the contentions as urged on behalf of the Respondents. Rule
         86A(3) of the CGST Rules, 2017 clearly mandates that the restriction on the
         electronic credit ledger cannot continue beyond a period of one year from the date
         of imposition of such restriction. In the present case, the restriction was imposed on
         16th February 2024, and thus, upon expiry of one year, the same could not have
         been continued. This position is also acknowledged by the Department in its reply
         affidavit. Therefore, by operation of law, the credit ought to have been unblocked.
         The Petitioner was not required to approach this Court seeking a declaration, as the
         benefit flows directly from the statutory provision itself.

         7. Mr. Raichandani is justified in placing reliance on the decision in Seya Industries
         Ltd. vs. State of Maharashtra (supra), wherein a similar view has been taken.

         8. Insofar as the contention raised by Mr. Adik, learned Counsel for the
         Respondent-Department, that the registration of the Petitioner stands cancelled and
         that unblocking of the credit would be subject to any further action the Department
         may propose to take, including issuance of a show cause notice, the same cannot be
         accepted for the purposes of the present proceedings.

         9. Insofar as the reliefs sought in the present Petition are concerned, it is required to
         be observed that any consequences in law arising out of cancellation of the
         Petitioner's registration, including issues relating to eligibility or utilization of credit,
         would necessarily have to be dealt with in accordance with the provisions of the Act
         and the Rules. However, insofar as the Petitioner's entitlement to the relief prayed
         for is concerned, the same flows by operation of law, and accordingly, it is required
         to be held that the impugned attachment/blocking of the credit has ceased to
         operate.

         10. In view of the above, we are not required to delve into the other issues. All
         contentions of the parties are expressly kept open.

         11. The Petition is disposed of by setting aside the impugned blocking of the
         Petitioner's credit dated 16th February 2024, as the same has ceased to operate
         upon expiry of the statutory period of one year.

         12. It is clarified that both the Petitioner and the Respondent-Department shall be
         at liberty to adopt appropriate proceedings in accordance with law in respect of any
         other issues, including those relating to Input Tax Credit (ITC)."

                                                                                (emphasis supplied)

5 Writ Petition No. 4815 Of 2024


                                            Page 10 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                                  ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                               9 WP 4899-25.DOC



11.              A similar view has also been taken by a co-ordinate Bench of this Court

in the case of Seya Industries Ltd. Vs. State of Maharashtra (supra), wherein it has

been held that the alleged ITC availed by the assessee which is blocked in the ECL

should be unblocked after the expiry of the period of one year in view of Rule

86A(3) of the CGST Rules. The relevant paragraph of the aforesaid decision is

reproduced below:-

         7. Rule 86A empowers 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 electronic credit ledger has been fraudulently
         availed or is ineligible in as much as ................, 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. Sub-rule (3) of Rule 86A provides that such restriction shall
         cease to have effect after the expiry of a period of one year from the date of imposing
         such restriction. The restriction was imposed on 23 rd November 2022 and one year
         period expired on or about 23 rd November 2023. Therefore, by operation of law
         itself, the restriction imposed has lapsed. Ordered accordingly.
                                                                                 (emphasis supplied)
12.              We are in agreement with the submissions made on behalf of the

Petitioner that prior to blocking of the ITC in the ECL of the Petitioner, a hearing

needs to be given to the Petitioner, and the absence of a pre-decisional hearing

would be in violation of the principles of natural justice. This, in view of the fact

that blocking of the ITC in the ECL of the Petitioner entails civil consequences,

and would have a crippling effect on the business of the Petitioner, which would

require that a hearing be granted prior to the blocking of the ITC in the ECL. In

such context, in K-9 Enterprises Vs. State of Karnataka & Anr. (supra), the

Karnataka High Court held as under:-

         "8.11 As stated supra, principles of natural justice necessarily had to be observed
         and adhered to by the respondents-revenue before passing the impugned orders
         blocking the ECL of the appellants which would entail and visit them with serious
         civil consequences; so also, in the absence of extraordinary reasons or exceptional
         circumstances obtaining from the material available with them which would obviate



                                             Page 11 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                                   ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                       9 WP 4899-25.DOC



         or dispense with the requirement of pre-decisional hearing, it was also incumbent
         upon the respondents-revenue to provide/grant a pre-decisional hearing to the
         appellants before invoking Rule 86A and blocking the ECL of the appellants by
         passing the impugned orders which are vitiated and failure to appreciate this by the
         learned Single Judge has resulted in erroneous conclusion.

         8.12 It is also significant to note that in the event the respondents-revenue had not
         provided/granted a pre-decisional hearing to the appellants before blocking its ECL
         by invoking Rule 86A, the only consequence flowing from the same would be that
         there would be a possibility of the appellants taking steps to utilizing/availing the
         ITC available in the ECL; the said process of the appellants utilizing/availing the
         ITC is not instantaneous/immediate unlike bank accounts, from which monies can
         be withdrawn, if the same are not attached and the said process culminating in the
         ITC being converted to actual benefit in favour of the appellants would consume
         time as explained by the Gujarat High Court in Samay Alloys' case supra; in other
         words, it was not physically possible for the appellants to immediately/forthwith
         encash/withdraw the ITC available in its ECL so as to warrant emergent/urgent
         blocking of the ECL without providing a pre-decisional hearing to the appellants; at
         any rate, upon the respondents-revenue issuing appropriate notices to the appellants
         providing pre-decisional hearing proposing to invoke Rule 86A, the respondents-
         revenue would be entitled to supervise/monitor the proceedings including the ECL
         of the appellants and if circumstances so warrant, respondents-revenue would be
         entitled to block the ECL even before completion of pre-decisional hearing was
         completed; viewed from this angle also, the impugned orders passed by the
         respondents-revenue blocking the ECL of the appellants without providing/granting
         pre-decisional hearing and confirmed by the learned Single Judge deserve to be set
         aside.

         8.13 In view of the aforesaid discussion, we are of the considered opinion that the
         learned Single Judge clearly fell in error in coming to the conclusion that a pre-
         decisional hearing was not required to have been provided/granted to the appellants
         by the respondents-revenue prior to passing the impugned orders blocking the ECL
         of the appellants and consequently, the said findings recorded by the learned Single
         Judge deserve to be set aside."
                                                                         (emphasis supplied)


13.              We are in complete agreement with the aforesaid view of the Karnataka

High Court. Thus, in our view, considering the settled principles of law and the

facts of the present case, the blocking of the alleged ITC in the ECL of the

Petitioner beyond the period of one year is an action which is against the mandate

of Rule 86A of the CGST Rules, rendering the impugned action to be arbitrary

and illegal. We, therefore, deem it appropriate to dispose of this writ petition in

terms of the following order:-




                                         Page 12 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                             ::: Downloaded on - 24/04/2026 20:30:49 :::
                                                                                 9 WP 4899-25.DOC




                                           ORDER

a) The impugned provisional attachment order dated 27 th February 2025 issued by Respondent No. 2 vide FORM GST DRC-22 of the bank accounts bearing nos. 40963536902 and 921020036455317 held with Respondent Nos. 6 and 7 respectively is hereby quashed and set aside. Consequent thereto, the blocking of the Petitioners ECL vide Reference No. BL2703250000079 dated 7 th March 2025 stands unblocked, available to be used in the normal course of the Petitioner's business as may be permissible in law. The Petitioner's bank account bearing No. 40963536902 and 921020036455317 maintained with Respondent Nos. 6 and 7 stands defreezed.

b) It is however clarified that the Petitioner and the Respondent-Department are at liberty to adopt appropriate proceedings, as may be permissible in law in respect of any other issues, including those of ITC.

c) Rule made absolute in the aforesaid terms. No costs.

           (AARTI SATHE, J.)                           (G. S. KULKARNI, J.)




                                       Page 13 of 13
Laxmi


        ::: Uploaded on - 20/04/2026                       ::: Downloaded on - 24/04/2026 20:30:49 :::