The Karnataka High Court quashed the blocking of ₹43.89 lakh of credit, holding that a pre-decisional hearing following K-9 Enterprises must allow the taxpayer a real chance to produce documents.
The Karnataka High Court has held that a notice allowing three days to produce documents does not satisfy the pre-decisional hearing required before credit is blocked under Rule 86A of the CGST and KGST Rules. [Mahaveer Trading Company v. State of Karnataka & Ors., 2026-juristway.com-3168-HC(Karnataka)-GST]
Justice T.M. Nadaf allowed the writ petition, quashed the order dated 28 Aug 2026 blocking credit of ₹43,89,637, and directed the authorities to unblock it.
The petitioner relied on the Division Bench ruling in K-9-ENTERPRISES VS. STATE OF KARNATAKA ((2024) 167 taxmann.com 499 (Karnataka)), which read a pre-decisional hearing into Rule 86A and quashed blocking orders resting on borrowed satisfaction. It said that although a hearing notice was issued, the documents it produced were never considered.
The Additional Government Advocate argued that three days were given and that the petitioner failed to produce appropriate documents. He fairly stated that the State revenue had now been instructed to follow K-9 Enterprises to avoid repeated petitions.
The Court held that three days could not be called sufficient notice for producing documents and substantiating the claim. Citing Maneka Gandhi vs. Union of India, it said natural justice is not an empty formality, and that omitting a fair hearing typically renders an order void ab initio.
The authority must give the petitioner an opportunity to place its records and must hear it before taking any action under Rule 86A, with the petitioner directed to appear on 27 Oct 2026.
2026-juristway.com-3168-HC(Karnataka)-GST
