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E. Availing of credit without documents: The registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36.

12. Rule 86A undoubtedly could be said to have conferred drastic powers upon the proper officers if they have reason to believe that the activities or invoices are suspicious. The Rule 86A is based on "reason to believe". "Reason to believe" must have a rational connection with or relevant bearing on the formation of the belief. It is a subjective term and can be interpreted differently by different individuals. Prima facie, it appears that the Rule 86A does not even contemplate for issue of any show-cause notice or intimation notice. In such circumstances, the person affected may be taken by surprise when he would go to the portal to pay taxes and finds that his ITC is not usable.

13. This very Bench in one of its recent pronouncements in the case of Samay Alloys India Pvt. Ltd. Vs. State of Gujarat, (Special Civil Application No.18059 of 2021) decided on 03.02.2022 had the occasion to consider the scope of Rule 86A more particularly, in a case wherein the balance in the electronic credit ledger is NIL. In Samay Alloys India Pvt. Ltd. (Supra), this Court took the view that the Rule 86A is not the Rule which entitles the proper Officer to make debit entries in the electronic credit ledger of the registered person. The Rule merely allows the proper officer to disallow the registered person the debit from the electronic credit ledger for the limited period of time and on a provisional basis. This Court C/SCA/17202/2021 JUDGMENT DATED: 23/02/2022 took the view that in case the debit entries are made by the proper Officer, the same would tantamount to permanent recovery of the input tax credit and the permanent recovery is governed by the statutory provisions (Sections 73 or 74 respectively of the CGST Act as the case may be) and it would certainly travels beyond the plain language and the underlined intent of Rule 86A.

                                         Balance
2      28/07/2021   BL24072    Jul-21     Blocked       Debit       1.00   48,58,644 48,58,645      0.00    97,17,290
                    1000015                                                   .00       .00

3          -             -        -       Closing         -          -         -            -           -        -
                                          Balance

23. The aforesaid order is bereft of any reasons and therefore, there is no question of any reflection therein of the authority passing the order on being satisfied about the necessity of passing it. When the first requirement of Rule 86A is of, "having reasons to believe" and it has manifestly been not followed, the impugned order would have to be treated as erroneous in law. The second requirement regarding recording of reasons in writing is also followed in breach. In such circumstances, it can be said that the case on hand is one of an arbitrary exercise of power under Rule 86A.

24.2 However, section 43A has not been notified yet. Therefore, the same does not apply. In the absence of section 43A being notified, this power has not been contemplated by the Act. Further, the notification of rule 86A prior to the section 43A is indicative of the fact that the rule did not intend to draw the validity from section 43A. Thus, the blocking of a recipient's credit ledger on the account of default of a supplier, vide rule 86A, is wanting of statutory authority at present.