Punjab & Haryana High Court Quashes Re-Blocking of Input Tax Credit; Says Revenue Cannot Reissue Block After One-Year Statutory Limit Under Rule 86A

Case Name: NB International vs. Commissioner, Central Goods & Services Tax & Others
Date of Judgment: 28 November 2025
Citation: CWP-4938-2025
Bench: Hon’ble Mrs. Justice Lisa Gill and Hon’ble Mr. Justice Parmod Goyal

Held: The Punjab and Haryana High Court quashed the re-blocking of Input Tax Credit (ITC) of ₹82.5 lakh in the Electronic Credit Ledger of NB International, holding that Rule 86A imposes an absolute one-year limit on the blocking of ITC. Once the period expires, the restriction automatically lapses and cannot be renewed on the same grounds. The Court applied the Supreme Court’s ruling in Kesari Nandan Mobile, holding that a statutory embargo cannot be circumvented by repeatedly issuing fresh blocking orders.

Summary: The petitioner, a bona fide manufacturer of brass and copper products, had its ITC blocked on the allegation that its supplier, M.S. Trading Co., was non-existent. Although a part of the ITC was later unblocked after the petitioner’s representation, the authorities proceeded to block the full amount again, relying on the same allegation and without initiating any further proceedings.

The Court examined Rule 86A and Section 83 of the CGST Act side-by-side, noting that both provisions embody the same principle: provisional restrictions cannot operate beyond one year unless the legislature expressly provides for an extension. Reviewing the Supreme Court’s detailed reasoning in Kesari Nandan Mobile, the Bench reiterated that an act prohibited directly cannot be done indirectly through repeated orders.

The Court held that the revenue had not produced any new material or developments after the initial blocking. Therefore, the second blocking was not a fresh action but an impermissible renewal designed to bypass statutory safeguards.

Decision: The Court set aside the re-blocking of Input Tax Credit, holding it unsustainable once the one-year statutory period had expired. It clarified that the revenue remains free to proceed in accordance with law through proper adjudicatory mechanisms, but cannot keep a taxpayer’s credit frozen indefinitely by recycling the same grounds. The writ petition was accordingly allowed.