Synopsis

The petitioner, a company, was subjected to a search by the GST authorities on 12th February 2025. Thereafter, the respondent authorities provisionally attached the petitioner’s bank accounts under Section 83 of the MGST Act and blocked the Input Tax Credit (ITC) available in its Electronic Credit Ledger (ECL) under Rule 86A of the CGST Rules, 2017. The petitioner challenged these actions. The Bombay High Court quashed the provisional attachment orders and directed defreezing of the bank accounts. It also held that the blocking of ITC in the ECL ceased to have effect after the expiry of one year from the date of imposition, as per Rule 86A(3), and therefore the ECL stood unblocked by operation of law. The court further held that before blocking ITC, a pre‑decisional hearing is required, as such action entails serious civil consequences. The court disposed of the petition, leaving all other issues (including the genuineness of ITC) open to be decided in appropriate proceedings.

Court: High Court of Judicature at Bombay (Civil Appellate Jurisdiction)

Coram: Justice G. S. Kulkarni and Justice Aarti Sathe

Date of Judgment: 25th March 2026

Citation: Writ Petition No. 4899 of 2025

Core Law: Central Goods and Services Tax Act, 2017 / Maharashtra Goods and Services Tax Act, 2017 – Section 83 (provisional attachment); Rule 86A of the CGST Rules, 2017 (blocking of electronic credit ledger); Principles of natural justice.

2. Legal Framework

Major laws and provisions involved

• Central Goods and Services Tax Act, 2017 / Maharashtra Goods and Services Tax Act, 2017 – Section 83 (provisional attachment of property to protect revenue)

• Central Goods and Services Tax Rules, 2017 – Rule 86A (conditions for restricting debit of input tax credit from electronic credit ledger), specifically sub‑rule (3) (restriction ceases after one year)

• Principles of natural justice – audi alteram partem (right to be heard before adverse action)

Key legal principles applied

• Automatic unblocking of ITC after one year: Rule 86A(3) of the CGST Rules provides that the restriction on debit of input tax credit from the electronic credit ledger shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction. This operates automatically by operation of law, without requiring a separate order.

• Pre‑decisional hearing required for blocking ITC: Blocking of ITC in the ECL entails serious civil consequences and has a crippling effect on business. Therefore, principles of natural justice require that a hearing be granted before such action is taken, unless there are extraord

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