Rule 86A of the CGST Rules, 2017  – Blocking of ECL - The petitioner challenged the blocking of ECL and submitted that same has been done against the provisions of Section 83 and rule 86-A, without following the procedures laid down. The respondent counsel contended that the action taken against the petitioner is strictly in accordance with law. The petitioner had fraudulently availed credit to the extent of Rs. 49.19 crore in the ECL during the period from July 2017 to September 2020 fraudulently and illegally. The court observed that the impugned order does not give any reasons and, therefore, there is no question of the authority passing the order on being satisfied about the necessity of passing it. Whereas the first requirement of rule 86-A is of, “having reasons to believe” and it has manifestly been not followed. The second requirement regarding recording of reasons in writing, is also followed in breach. Further, the order does not specify the amount to the extent to which the ECL has been blocked. If the credit amount available in the ECL is more than the amount found to be fraudulently or erroneously availed of, the entire credit amount amount lying in the ECL cannot be subjected to the disability of rule 86-A. The exercise of power under rule 86-A made by respondent no.1 was not because she was independently satisfied about the need for blocking the ECL but, was due to the fact that she felt compelled to obey the command of her superior.

Held that:- The Hon’ble High Court quashed and set aside the impugned order.