Rule 86A of the CGST Rules, 2017 —Blocking of ITC –--The applicant challenged the action dated 17th of December, 2021 of the respondents of blocking his ITC by proceeding under Rule 86A. It is alleged that the suppliers of the petitioner is found to be non-existing. The petitioner counsel submitted that SCN was issued against the supplier which was dropped lateron. Once the very basis of proceeding against the petitioner stands withdrawn, there was no reason to block the ITC. The court observed that the reason to invoke the power conferred under Rule 86A against the petitioner is an intelligence report received from Principal Chief Commissioner regarding a racket of firms indulging in fake passing of illicit ITC. Merely by recording that some investigation is going-on a drastic far-reaching action under Rule 86A cannot be sustained. There is no reason recorded by the Authority for exercising power which would show independent application of mind that can constitute reasons to believe which is sine qua non for exercising power. The order is bereft of any material or 'reason to believe' that the petitioner is guilty of fraudulent transaction or is ineligible under Section 16 of the Act.

Held that:- The Hon’ble High Court set aside the impugned order dated 17th December, 2021.