Sunlog Services Pvt. Ltd. Vs Assistant Commissioner of Central Tax (Karnataka High Court)
The Karnataka High Court considered a petition challenging an adjudication order dated 30.12.2025 passed under Section 73 of the Central Goods and Services Tax Act, 2017. The proceedings arose from a mismatch between the details reflected in GSTR-2A and GSTR-3B. According to the adjudication order, the supplier to whom the petitioner had made remittances had not filed GST returns and proceedings concerning the supplier were pending before the National Company Law Tribunal (NCLT). The Adjudicating Officer observed that while the petitioner could pursue a remedy before the NCLT, the Department had no such recourse, and therefore directed the petitioner to discharge the tax liability and thereafter recover the amount from the defaulting supplier, subject to the NCLT proceedings.
The petitioner sought interim interference on the grounds that the GST authorities could not proceed against it when payment had already been made to the supplier without first initiating proceedings against the supplier. The petitioner relied upon the Division Bench judgment of the Calcutta High Court in Suncraft Energy (P.) Ltd. v. Assistant Commissioner, State Tax, wherein it was observed that proceeding against the purchasing dealer without first taking action against the selling dealer, despite production of tax invoices and bank statements evidencing payment of the price and tax, was arbitrary. It was also submitted that the Supreme Court had not interfered with the Division Bench’s order because of the extent of the demand. The petitioner further relied on the Karnataka High Court’s decision in Instakart Services (P.) Ltd. v. Union of India, which read down Section 16(2)(c) of the CGST Act and Rule 64 to extend the benefit of input tax credit to a bona fide recipient where the supplier had defaulted, while noting that the said judgment was under challenge in an intra-court appeal.
The High Court considered these submissions along with the fact that it had granted an interim order in W.P. No.13730/2026 involving the question whether proceedings could be initiated against a recipient who was not in default without first initiating action against the defaulting supplier. The Court granted an interim order as prayed for, to remain in force until further orders, while reserving liberty to the respondents to complete the pleadings and seek vacation of the interim order. Notice was accepted on behalf of the respondents, and the petition was directed to be re-listed on 22.09.2026.
Cases Discussed
- Instakart Services (P.) Ltd. Vs. Union of India (Karnataka High Court), [2026] 185 com 308 (Karnataka)
- Suncraft Energy (P.) Ltd. V/s Assistant Commissioner, State Tax (Calcutta High Court), [2023] 153 com 81 (Calcutta)
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Mr. Sandeep Huilgol, the learned counsel for the petitioner, is heard on the grant of an ad interim order.
The petitioner’s grievance is with the Adjudication Order dated 30.12.2025 under Section 73 of the Central Goods and Services Tax Act, 2017 [for short, ‘the CGST Act’]. The proceedings are initiated for adjudication on the mismatch between the details in GSTR-2A and GSTR-3B and as could be seen from the impugned Adjudication Order, the supplier to whom the petitioner has made remittances has not filed returns and that there are pending proceedings with the National Company Law Tribunal [NCLT]. The Adjudicating Officer has opined that the petitioner could have remedy before the NCLT and the Department will not have such recourse and therefore the petitioner must discharge the liability and recover the amount from the defaulting supplier subject to proceedings with the NCLT.
Mr. Sandeep Huilgol submits that the petitioner requests for interference on the following grounds.
a. the Authorities could not have proceeded against the petitioner when admittedly remittances are already made to the supplier without first initiating proceedings against the supplier.
b. The Division Bench of High Court of Calcutta in Suncraft Energy (P.) Ltd. V/s Assistant Commissioner, State Tax reported in [20231 153 com 81 (Calcutta) has opined thus,
“9. The first respondent without resorting to any action against the fourth respondent who is the selling dealer has ignored the tax invoices produced by the appellant as well as the bank statement to substantiate that they have paid the price for the goods and services rendered as well as the tax payable there on, the action of the first respondent has to be branded as arbitrarily.”
c. When this Division Bench’s order is carried to the Apex Court, the Apex Court has not interfered because of the extent of demand.
d. A Co-ordinate Bench of this Court in Instakart Services (P.) Ltd. Vs. Union of India reported in [20261 185 com 308 (Karnataka) has read down the provisions of Section 16(2)(C) of the CGST Act, 2017 and Rule 64 of the corresponding Rules to allow the benefit of ITC to a bonafide recipient when the default of lapse is by the supplier. However, the Co-ordinate Bench’s decision is called in question in Intra-Court appeal and is pending decision.
These circumstances are considered as also the fact that this Court in W.P.No.13730/2026 has granted interim order considering whether action can be initiated against a recipient who is not in default without first initiating proceedings against the defaulting supplier. The interim order is granted as prayed for to be in force until further orders but with liberty to the respondents to complete the pleadings and seek vacating.
Mr. Aravind V. Chavan, a learned Standing counsel for the respondents, is called upon to accept notice.
The office is directed to re-list this petition on 22.09.2026.
