Case Law Details
Hotel Royal Suits Vs State of Karnataka (Karnataka High Court)
In Hotel Royal Suits vs State of Karnataka, the Karnataka High Court examined the validity of an adjudication order passed under Section 73(9) of the Karnataka Goods and Services Act, 2017 on the ground of short declaration of tax liability. The authority had proceeded to decide the matter based on available material, noting that despite communication of notices, including recovery proceedings, the petitioner failed to submit a reply to the show-cause notice.
The petitioner contended that the failure to respond was due to a bona fide lapse and that relevant material was available to address the allegations. The Court observed that the adjudication order was effectively ex-parte, as it was passed without the benefit of the petitioner’s reply. Considering this, the Court held that it would be appropriate to set aside the order and provide an opportunity to respond.
Accordingly, the impugned order was quashed and the matter remitted to the stage of reply to the show-cause notice. The petitioner was directed to appear before the authority on the specified date and deposit 10% of the tax due, subject to final adjudication. The Court clarified that failure to avail the opportunity would result in withdrawal of the relief granted, with all contentions kept open.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. Sri. K. Hemakumar, learned Additional Government Advocate accepts notice for the respondents.
2. The petitioner has assailed the validity of the order of adjudication at Annexure-D passed under Section 73(9) of the Karnataka Goods and Services Act, 2017. The authority has proceeded on the premise that the taxpayer has short declared the tax liability.
3. A perusal of the order of adjudication would reveal that the authority has asserted that though there has been communication of the notices including recovery proceedings, the petitioner having failed to reply, the authority has proceeded to adjudicate the matter on the available material.
4. Learned counsel for the petitioner submits that the non-reply of the show-cause notice was due to bona-fide lapse and the petitioner has the material to demonstrate and meet the grounds raised in the show-cause notice.
5. Noticing that the order passed is in-effect an ex-parte order, in the sense that the authority did not have benefit of a reply to the show-cause notice, it would be appropriate to set aside the order and remit the matter back for consideration on merits and it would be appropriate to enable the petitioner to make out reply to the show-cause notice.
6. Accordingly, the order at Annexure-D is set aside. Matter is remitted to the stage of reply to show-cause notice. Petitioner to appear before respondent No.5 without further notice on 25.03.2026. Petitioner to make payment of 10% of the tax due. Such payment would be subject to adjudication to be made.
7. It is made clear that, if the petitioner fails to take benefit of opportunity granted, the indulgence granted by this Court will stand revoked. All contentions are kept open.
Accordingly, petition is disposed of.
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