Case Law Details
Velankani Information Systems Private Limited Vs. Joint Commissioner of Central Tax And Others (Karnataka High Court)
Material Facts
The petitioner challenged the adjudication order dated 30.03.2026 passed under Section 74 of the Central Goods and Services Tax Act, 2017 and the consequential demand for the tax periods from 2019-20 to 2022-23.
Procedural History
The writ petition questioned the adjudication order under Section 74 of the CGST Act. The petitioner sought interim relief before the Karnataka High Court.
Legal Issue(s)
- Whether proceedings based on a common notice covering different tax periods warranted interference.
- Whether proceedings arising from mismatch between Forms GSTR-2A and GSTR-3B were sustainable where taxes had been paid to suppliers and transactions were genuine.
- Whether the petitioner was entitled to Input Tax Credit on tax paid for machinery and equipment used in construction of commercial buildings leased out on rent.
Relevant Statutory Provisions
- Section 74 of the Central Goods and Services Tax Act, 2017.
Petitioner’s Submissions
The petitioner submitted that:
- The adjudication was based on a common notice covering different tax periods. Although a Division Bench had decided the issue against the registered taxpayer, the matter was pending before the Supreme Court. It was also pointed out that in W.P. No.14323/2026, this Court had observed that if the Supreme Court decided the issue in favour of the registered taxpayer, the proceedings would be without jurisdiction.
- The proceedings arose due to a mismatch between Forms GSTR-2A and GSTR-3B despite taxes having been paid to suppliers. Relying on Instakart Services Private Limited v. Union of India, it was contended that where transactions are genuine and declared in GSTR-3B, proceedings should not be initiated merely because of a supplier’s failure or infraction.
- As the petitioner constructed commercial buildings that were leased out, it claimed entitlement to ITC on tax paid to suppliers, including those supplying machinery and equipment. Reliance was placed on the interim order dated 04.06.2026 passed in W.P. No.14922/2026.
The petitioner further submitted that the disputed ITC relating to the third ground constituted approximately 8% to 9% of the total disputed ITC.
Court’s Findings and Reasoning
Considering the submissions, the High Court granted an interim order. The Court directed that the petitioner shall maintain a minimum of 10% of the disputed availment of the ITC used on rental income in its Electronic Credit Ledger, relevant to the third ground, subject to the outcome of the writ petition.
The Court clarified that the interim order would remain in force until further orders, while granting liberty to the respondents to complete the pleadings and seek vacation of the interim relief.
Final Ruling
The Karnataka High Court granted interim relief in the challenge to the Section 74 adjudication order, subject to the petitioner maintaining a minimum of 10% of the disputed ITC relating to rental income in its Electronic Credit Ledger. The respondents were given liberty to seek vacating of the interim order after completion of pleadings, and the matter was directed to be re-listed on 18.08.2026.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has called in question the Adjudication Order dated 30.03.2026 under Section 74 of the Central Goods and Services Tax Act, 2017 and the consequential Demand. The Adjudication Order is for the tax periods between 2019-20 and 2022-23.
Sri V Raghuraman, the learned Senior Counsel for the petitioner, submits that this Court’s interference is sought on the following.
[a] The first question will be about a common notice for different tax periods. Though this question is answered by a Division Bench against the Registered Tax Person [RTP], this is pending before the Apex Court, and this Court in the writ petition in W.P. No.14323/2026, while considering the request for an interim order on 17.06.2026, has observed that if the Apex Court answers in favour of the RTP, the whole proceedings will be without jurisdiction.
[b] The petitioner has offered taxes to the supplier and the reason for the present proceedings are because of a mismatch between Forms GSTR-2A and GSTR-3B. As held by this Court in Instakart Services Private Limited v. Union of India1 , if the transactions are genuine and accordingly declared in GSTR-3B, there is no reason for commencement of the proceedings because of what could be a failure or an infraction by the supplier.
[c] The petitioner is in the business of construction of inter alia commercial buildings which is leased out to other entities for a price and therefore the petitioner would be entitled to the Input Tax Credit [ITC] on the tax paid to the account of different suppliers including those who have offered machinery and equipment for construction. This is an aspect that has come up for consideration by this Court in the writ petition in W.P. No.14922/2026 while considering the request for an interim order, and this Court by Order dated 04.06.2026 has granted an interim Order subject to the condition that the petitioner shall maintain a minimum of 10% of the disputed availment of the ITC subject to the outcome of the petition.
When queried, the learned Senior Counsel submits that the disputed ITC under the third ground would roughly be about 8 to 9% of the total disputed ITC.
In consideration of these submissions, the interim order is granted, but subject to the condition that the petitioner shall maintain a minimum of 10% of the disputed availment of the ITC used on rental income in its Electronic Credit Ledger [relevant to the third ground] subject to the outcome of the petition.
This Order shall be in force until further orders but with liberty to the respondents to complete the pleadings and seek vacating.
Sri Aravind V Chavan, a learned standing counsel for the respondents, is called upon to accept notice for the respondents, and the office is directed to re-list this petition on 18.08.2026.
Note:
1 [2026] 42 Centax 48 (Kar.)
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