Disposed¶40

M/S F R Steel Traders v. Assistant Commissioner of Commercial Taxes

Indirect Taxation – GST

Karnataka HC12 Mar 2026WP/7734/2026

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Case brief

AI extract

What is this about?

Karnataka HC writ petition (T-RES) by M/s F R Steel Traders challenging Rule 86A CGST/SGST order dated 24.10.2025 blocking electronic credit ledger and availment of Input Tax Credit; order set aside for want of pre-decisional notice and hearing; natural justice to be read into Rule 86A per paragraph 8.6 of K-9 Enterprises (2025) 137 GSTR 450; liberty reserved to authorities to re-invoke Section 86A CGST Act as per procedure; petition disposed of.

What did the court decide?

Order dated 24.10.2025 (Annexure-Q) blocking the electronic credit ledger is set aside; liberty reserved to the respondent authorities to take recourse to Section 86A of the CGST Act as per procedure if circumstances so warrant. ¶40

M/S F R Steel Traders Vs Assistant Commissioner of… — GST and Indirect Tax | Karnataka HC (2026)

What the court decided

AI extract

Outcome

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Issue for consideration

Whether the order dated 24.10.2025 (Annexure-Q) blocking the petitioner's electronic credit ledger under Rule 86A, passed without issuing any notice or conducting a hearing, ought to be set aside in view of the requirement that principles of natural justice be adhered to while invoking Rule 86A / Section 86A powers.

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Court's answer

A perusal of the order at Annexure-Q does not reveal that any notice was issued to the petitioner nor that a hearing was conducted before passing of the order dated 24.10.2025 blocking the electronic credit ledger.

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Ratio / Principle

In light of the observations at paragraph No.8.6 of the K-9 Enterprises judgment, the order dated 24.10.2025 at Annexure-Q is set aside.

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Key takeaways

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.ratio¶36

Detailed headnote1 paragraphs

Indirect Taxation — GST — Blocking of electronic credit ledger / availment of Input Tax Credit under Rule 86A of the CGST/SGST Rules — Order No. ITC BLOCK/CR-/2025-26 dated 24.10.2025 (Annexure-Q) passed by the Assistant Commissioner of Commercial Taxes (LGSTO-090) without issuing any notice to the petitioner or according a hearing — Principles of natural justice, though not expressly provided in Rule 86A, must necessarily be read into the Rule and complied with when it is invoked, blocking of the electronic credit ledger entailing serious civil consequences warranting an opportunity of hearing — reliance placed on paragraph 8.6 of M/s. K-9 Enterprises vs. State of Karnataka and Another, (2025) 137 GSTR 450 — Annexure-Q order set aside, with liberty reserved to the respondent authorities to take recourse to Section 86A of the CGST Act as per procedure if circumstances so warrant — Writ petition under Articles 226 and 227 of the Constitution of India disposed of (Single Judge, S Sunil Dutt Yadav J.).

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1 - NC: 2026:KHC:14908 WP No. 7734 of 2026

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 12^TH DAY OF MARCH, 2026

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BEFORE

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THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 7734 OF 2026 (T-RES)

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BETWEEN:

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Digitally signed by VIJAYA P Location: HIGH COURT OF KARNATAKA

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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.

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…PETITIONER

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(BY SRI. M N SHANKARE GOWDA, ADVOCATE)

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AND:

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ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (LGSTO-090), DGSTO-03, TTMC, 4TH BLOCK, 1ST FLOOR, BMTC BUILDING, JAYANAGAR, BENGALURU - 560 011.

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2 - NC: 2026:KHC:14908 WP No. 7734 of 2026

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HC-KAR

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STATE OF KARNATAKA REPRESENTED BY ITS FINANCE SECRETARY, VIDHANA SOUDHA, BENGALURU - 560 001.

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UNION OF INDIA REPRESENTED BY ITS FINANCE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI-110001.

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…RESPONDENTS

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(BY SRI. K HEMAKUMAR, AGA FOR R1 AND R2; SRI. MADANAN PILLAI, CGC FOR R3)

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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.

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THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV

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3 - NC: 2026:KHC:14908 WP No. 7734 of 2026

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HC-KAR

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ORAL ORDER

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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.

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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 .

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Perused the paragraph No.8.6 of the judgment as referred above which reads as follows:

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"8.6 In the light of the afore stated principles, we are of the view that though rule 86A does not

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4 - NC: 2026:KHC:14908 WP No. 7734 of 2026

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HC-KAR

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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."

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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.

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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

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are so made out to take recourse to the power under Section 86A of the CGST Act as per procedure.

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NC: 2026:KHC:14908 WP No. 7734 of 2026

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HC-KAR

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