BharatTaxGST

M/S Suf Enterprises vs. Assistant Commissioner Central Tax

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WP/39384/2025HC KarnatakaGSTCNR KAHC01084542202520 February 2026Bench: S SUNIL DUTT YADAV6 pages
For Petitioner: SRI. BHAGAVATH P., ADVOCATEFor Respondent: SRI. AKASH B. SHETTY, ADVOCATE

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Cause title — parties, addresses and appearances
- 1 - HC-KAR NC: 2026:KHC:10637 WP No. 39384 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF FEBRUARY, 2026 BEFORE THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 39384 OF 2025 (T-RES) BETWEEN: M/S. SUF ENTERPRISES, HAVING ADDRESS AT: NO.1252, GROUND FLOOR, RACHENAHALLI MAIN ROAD, BENGALURU URBAN, KARNATAKA- 560077. A SOLE PROPRIETORSHIP REPRESENTED BY ITS PROPRIETOR SYED UMAR FAROOQ S/O. SYED IBRAHIM, RESIDING AT 1-115, BC COLONY, BNR PETA, BAKARA NARASINGA RAYANI PETA, CHITTOOR, ANDHRA PRADESH- 517 419. …PETITIONER (BY SRI. BHAGAVATH P., ADVOCATE) AND: ASSISTANT COMMISSIONER CENTRAL TAX, NORTH DIVISION 7, NORTH COMMISSIONERATE, NO.59, GROUND FLOOR, HMT BHAWAN, BELLARY ROAD, GANGANAGAR, BENGALURU 560032. …RESPONDENT (BY SRI. AKASH B. SHETTY, ADVOCATE) Digitally signed by VIJAYA P Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:10637 WP No. 39384 of 2025 THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DECLARE THE ACTION OF RESPONDENT NO.1 IN BLOCKING THE ELECTRONIC CREDIT LEDGER FOR AN AMOUNT OF RS.1,42,05,140/- BY CREATING NEGATIVE BALANCE IN ELECTRONIC CREDIT LEDGER OF THE PETITIONER THROUGH REFERENCE NO. VIDE REF. NO.BL2911250000811 DATED 27.11.2025 (ANNEXED AS ANNEXURE-A) AS BEING VOID, ARBITRARY, ILLEGAL, WITHOUT JURISDICTION, VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE APART FROM BEING VIOLATIVE OF ARTICLES 14, 19(1)(g) AND 265 OF THE CONSTITUTION OF INDIA, AND CONSEQUENTLY SET ASIDE THE SAME AS NULL AND VOID AND PASS SUCH FURTHER OR OTHER ORDER(S) AS THIS HON'BLE COURT MAY DEEM FIT AND PROPER IN THE INTEREST OF JUSTICE. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV - 3 - HC-KAR NC: 2026:KHC:10637 WP No. 39384 of 2025

ORAL ORDER The petitioner has called in question the action of respondent No.1 in blocking the electronic credit ledger and creating a negative balance in terms of Annexure-A.

2.

On perusal of Annexure-A, it is noticed that the electronic credit ledger has been blocked with the reason assigned as "Credit claimed without receipt of goods/services, supplier found non-functioning".

3.

Learned counsel for the petitioner submits that the power to block the credit ledger is by virtue of Rule 86A of the Central Goods and Services Tax Rules, 2017. It is further submitted that though there is no statutory mandate regarding hearing to be afforded before such power is exercised, however the Courts have interpreted that before blocking the credit ledger in exercise of power under Rule 86A, the assesses are required to be heard and reliance is placed on the judgment of this Court in the case of K-9 Enterprises, Kwality Metals, K-9-Industries v. HC-KAR NC: 2026:KHC:10637 The State of Karnataka, The Assistant Commissioner of Commercial Taxes, Belagavi reported in 2024 (10) TMI 491 - Karnataka High Court.

4.

Learned counsel, Sri. Akash B. Shetty appearing for the respondent - revenue is not able to controvert regarding the assertion that there was no notice before the action of blocking the credit ledger.

5.

Perused the order passed in the case of K-9 Enterprises and paragraph No.8.13 reads as follows: "8.13 In view of the aforesaid discussion, we are of the considered opinion that the learned Single Judge clearly fell in error in coming to the conclusion that a pre-decisional hearing was not required to have been provided/granted to the appellants by the respondents-revenue prior to passing the impugned orders blocking the ECL of the appellants and consequently, the said findings recorded by the learned Single Judge deserve to be set aside. HC-KAR NC: 2026:KHC:10637 Point No.1 is accordingly answered in favour of the Appellant and against the respondents- revenue by holding that respondents-revenue committed a grave and serious error/illegality/infirmity in not providing/granting a pre-decisional hearing to the Appellant before passing the impugned order blocking its Electronic Credit Ledger under Rule 86A of the CGST Rules and consequently, the impugned orders deserve to be set aside."

6.

Taking note of the admitted position that no notice was issued, the action of blocking the credit ledger at Annexure-A is set aside. Respondent is directed to unblock the electronic credit ledger of the petitioner immediately upon receipt of copy of the order so as to enable the petitioner to file returns.

7.

Liberty is reserved in favour of the respondent to proceed against the petitioner, if circumstances are so made out in accordance with law and taking note of the observations made in the case of K-9 Enterprises in HC-KAR NC: 2026:KHC:10637 W.A.No.100425/2023 and connected matters. All contentions are kept. Accordingly, petition is disposed of. (S SUNIL DUTT YADAV) JUDGE MCR

Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.