Case Law Details
Srinidhi Construction Vs Joint Commissioner of Commercial Taxes (ADMN.) (Karnataka High Court)
The Karnataka High Court considered a petition challenging an adjudication order and the validity of a related show-cause notice. The petitioner contended that the proceedings were vitiated because the same authority conducted the audit and passed the adjudication order. It was also submitted that the petitioner could not file a reply to the show-cause notice due to bona fide reasons and that the rejection of the Input Tax Credit (ITC) claim could be demonstrated as erroneous if an opportunity was granted.
The Court examined the adjudication order, which recorded audit findings regarding discrepancies in the ITC claim and short declaration of output tax in GSTR-3B. It noted that although the show-cause notice had been served, the petitioner failed to respond and did not produce relevant documents such as RA bills, work orders, agreements, financial statements, purchase bills, and bank statements. Consequently, the authority proceeded with adjudication in the absence of supporting material.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has challenged the order of adjudication which is the Order-in-Original at Annexure-A. The petitioner has also sought to assail the validity of the show-cause notice. Petitioner has also sought for certain allied reliefs as well.
2. Learned counsel for the petitioner submits that the proceedings are vitiated as the authority which has conducted audit is the authority which has passed the adjudication order. It is further submitted that the petitioner could not make out a reply to the show-cause notice due to bonafide reasons. It is submitted that rejection of the respondent regarding ITC claim could be demonstrated to be erroneous, if opportunity is granted to the petitioner after setting aside the impugned order of adjudication.
3. Perused the order at Annexure-A. The authority has noticed the audit observations regarding discrepancy in the ITC claim as also the short declaration of output tax in GSTR-3B. It is noticed that though notice was served, however no reply has been made by the petitioner and the petitioner has failed to produce RA bills, work order, estimates for schedule B, agreement copy, profit and loss accounts, balance sheet, purchase bills and statement and bank statements. Accordingly, the authority in the absence of such material has completed the adjudication proceedings.
4. Learned counsel for the petitioner submits that if opportunity is granted, they would meet the grounds made out in the show-cause notice. Noticing that adjudication has recorded factual findings and the authority did not have the benefit of reply to the show-cause notice on its merits, it would be appropriate to afford an opportunity to the petitioner by remitting the matter back for reconsideration.
5. Accordingly, the impugned order at Annexure-A is set aside. Matter is remitted to respondent No.2 for reconsideration. The petitioner is permitted to make out reply to the show-cause notice. All contentions on merits are kept open including the contention regarding audit officer and adjudicating officer are one and the same.
6. Petitioner to appear before respondent No.2 without further notice on 20.05.2026. Petitioner to pay cost of Rs.10,000/- to the Karnataka Advocates Clerks Benevolent Trust, High Court Building, Bengaluru.
Accordingly, petition is disposed of.
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