Athreya Constructions Vs Additional Commissioner of Central Tax And Others (Karnataka High Court)
The Karnataka High Court heard the petitioner’s request for an interim order in a writ petition challenging an adjudication order passed under Section 74 of the Central Goods and Services Tax Act, 2017 and the State Goods and Services Tax Act, 2017.
The petitioner’s statutory appeal against the adjudication order had been dismissed on the ground of limitation. The petitioner thereafter invoked the High Court’s jurisdiction, primarily contending that the adjudication order lacked jurisdiction and was also passed in violation of the principles of natural justice.
The Court noted that the petitioner had been issued an Intimation in Form DRC-01A on 18.03.2021 referring to a search conducted at the petitioner’s premises on 10.11.2020 and the reversal of Input Tax Credit (ITC) amounting to ₹3,58,36,268 on 02.12.2020. According to the petitioner, a response had been submitted mentioning the reversal of ITC together with the calculation of interest and penalty at 15%. Despite this, a show cause notice was issued proposing levy of interest and penalty on an amount that included the ITC already reversed, resulting in the impugned adjudication order.
On behalf of the petitioner, it was submitted that the proceedings had been initiated only to fasten liability for interest and penalty despite the reversal of ITC along with interest and penalty, which was stated to be contrary to the scheme of Section 74 of the Act. Reliance was placed on Sections 74(6) and 74(7) to contend that the adjudicating authority, if at all it had jurisdiction, could have exercised it only under Section 74(7) and not under Section 74(6), rendering the entire proceedings vitiated.
After considering the specific circumstances, the submissions made and the records placed before it, the High Court granted the interim order as prayed for. The interim relief was directed to remain in force until further orders, while reserving liberty to the respondents to complete their pleadings and seek vacation of the interim order or early disposal of the matter.
The respondents accepted notice through counsel, the petitioner was directed to serve copies of the petition papers, and the matter was directed to be re-listed on 29.07.2026.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Sri V. Raghuraman, the learned Senior Counsel for the petitioner, is heard on the petitioner’s request for interim order.
The petitioner’s appeal as against the Adjudication Order under Section 74 of the Central Goods and Services Tax Act, 2017/State Goods and Services Tax Act, 2017 [for short, ‘the Act] is dismissed on the ground of limitation and the petitioner has invoked this Court’s jurisdiction to call in question the Adjudication Order primarily on the ground of jurisdiction while also contending that it is in violation of principles of natural justice.
The petitioner is issued with Intimation in Form DRC-01A on 18.03.2021 referring to search of the petitioner’s premises on 10.11.2020 and the reversal of ITC in a sum of Rs.3,58,36,268/- on 02.12.2020, and despite the petitioner’s response mentioning the reversal of the ITC along with calculating the interest and the penalty at 15%, the petitioner is issued with Show Cause Notice to show cause against levy of interest and penalty for the amount including the ITC reversed resulting in the impugned Adjudication Order.
Sri V. Raghuraman submits that the proceedings are commenced only to fasten the liability on the petitioner to pay interest and penalty notwithstanding the reversal of ITC with interest and penalty, and this would be contrary to the Scheme under Section 74 of the Act. The learned Senior counsel invites this Court’s attention to Section 74(6) and Section 74(7) of the Act to argue that the Adjudicating Officer could have assumed jurisdiction, if at all the Officer could have jurisdiction in the present circumstances, under Section 74(7) and not under Section 74(6) and that this vitiates the entire proceedings.
In consideration of the specific circumstances and the submissions and on perusal of the records, the interim order is granted as prayed for to be in force until further orders but with liberty to the respondents to complete pleadings and seek vacating or for early disposal.
Sri Jeevan J. Neeralgi, a learned standing counsel for the respondents, is called upon to accept notice for the respondents.
Sri Raghavendra C.R., the learned counsel on record for the petitioner, shall ensure that the copies of the petition papers are served on the chambers of Sri Jeevan J. Neeralgi at the earliest.
The office is directed to re-list this petition on 29.07.2026.
