M/S F R Steel Traders vs. Assistant Commissioner Of Commercial Taxes - Karnataka High Court, 12 March 2026

Cause title — parties, addresses and appearances

- 1 - HC-KAR NC: 2026:KHC:14908 WP No. 7734 of 2026 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF MARCH, 2026 BEFORE THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 7734 OF 2026 (T-RES) BETWEEN: 1. M/S F R STEEL TRADERS PROPRIETARY CONCERN, REPRESENTED BY ITS PROPRIETOR JAWAD PASHA, AGED ABOUT 27 YEARS PRESENTLY AT NO. 118/4 AND 118/5, GOTTIGERE VILLAGE, UTTARAHALLI HOBLI, BENGALURU URBAN, BENGALURU - 560 083. THE EARLIER ADDRESS NO. 20 AND 21, 1ST CROSS, BOMMANAHALLI VILLAGE, BEGUR HOBLI, BENGALURU - 560 068. …PETITIONER (BY SRI. M N SHANKARE GOWDA, ADVOCATE) AND: 1. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (LGSTO-090), DGSTO-03, TTMC, 4TH BLOCK, 1ST FLOOR, BMTC BUILDING, JAYANAGAR, BENGALURU - 560 011. Digitally signed by VIJAYA P Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:14908 WP No. 7734 of 2026 2. STATE OF KARNATAKA REPRESENTED BY ITS FINANCE SECRETARY, VIDHANA SOUDHA, BENGALURU - 560 001. 3. UNION OF INDIA REPRESENTED BY ITS FINANCE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI-110001. …RESPONDENTS (BY SRI. K HEMAKUMAR, AGA FOR R1 AND R2; SRI. MADANAN PILLAI, CGC FOR R3) *** THIS WP IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO-QUASH THE

ORDER IN NO. ITC BLOCK/CR-/2025-26 DATED 24.10.2025 (ANNX-Q) PASSED BY THE FIRST RESPONDENT UNDER RULE 86A OF THE CGST/ SGCT RULES AND ETC.

THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV HC-KAR NC: 2026:KHC:14908 ORAL ORDER

The petitioner has sought for setting aside of the order at Annexure-Q, dated 24.10.2025, whereby the respondent-authorities have passed an order to block the availment of Input Tax Credit by way of blocking the electronic credit ledger of the petitioner.

It is the case of the petitioner that the authority, before resorting to such action by virtue of powers conferred under Section 86A of the Central/State Goods and Service Tax Act, 2017 (hereinafter referred to as "the CGST Act") ought to have adhered to the principles of natural justice in light of the observations made by this Court in the case of M/s. K-9 Enterprises vs. State of Karnataka and Another (and other cases), (2025) 137 GSTR 450. 3. Perused the paragraph No.8.6 of the judgment as referred above which reads as follows: "8.6 In the light of the afore stated principles, we are of the view that though rule 86A does not HC-KAR NC: 2026:KHC:14908 expressly/specifically provide for adherence to principles of natural justice, the same would necessarily have to be read into rule 86A and complied with while invoking the said provision. It would also be apposite to state that when the ECL of the appellants was sought to be blocked and such credit cannot be utilised for up to one year, the said blocking would entail and result in serious civil consequences for the appellants warranting compliance with the principles of natural justice and providing an opportunity of hearing to the appellants."

A perusal of the order at Annexure-Q does not reveal that any notice was issued to the petitioner and hearing was conducted before passing of the order dated 24.10.2025 blocking the electronic credit ledger.

In light of the observations made at paragraph No.8.6 of the judgment extracted above, the order dated 24.10.2025 at Annexure-Q is set aside. However, liberty is reserved to the respondent authorities, if circumstances are so made out to take recourse to the power under Section 86A of the CGST Act as per procedure. HC-KAR NC: 2026:KHC:14908

Accordingly, petition is disposed of. (S SUNIL DUTT YADAV) JUDGE SHS