Karthikeya Construction Vs Superintendent of Central Tax (Telangana High Court)
Telangana High Court Permits GST Appeal and Allows Pre-Deposit from Bank Account Under Attachment
Summary: The Telangana High Court permitted M/s. Karthikeya Construction to pursue a statutory appeal against a GST adjudication order for the tax period April 2021 to March 2022. The Court granted two weeks to approach the appellate authority with a delay-condonation application and statutory pre-deposit. Importantly, where the petitioner’s Electronic Cash Ledger did not contain sufficient balance for the pre-deposit, the Court allowed payment of 10% of the outstanding tax dues from the bank account under attachment pursuant to FORM GST DRC-13.
Background of the Case
The petitioner challenged a show cause notice dated 24.09.2025, the summary in FORM GST DRC-01 dated 27.09.2025, and an Order-in-Original along with FORM GST DRC-07 dated 25.12.2025. The order imposed tax, interest and penalty under Section 73 of the Central Goods and Services Tax Act, 2017, for FY 2021–22.
The petitioner also challenged Notification No. 79 of 2020 dated 15.10.2020, which amended Rule 142(1A) of the CGST Rules, and questioned the vires of Section 16(2)(c) of the CGST Act. It sought a declaration that it was not liable for its supplier’s default.
Petitioner’s Submissions
The petitioner submitted that the Supreme Court decision in Bhandari Scrap Traders v. Union of India concerned the amended Section 41 of the CGST Act, which came into force on 01.10.2022, whereas the present dispute related to FY 2021–22. It therefore claimed to have independent grounds to challenge the provision.
During the hearing, the petitioner sought liberty to file an appeal against the adjudication order. It acknowledged that some delay might have occurred in approaching the appellate authority and requested sympathetic consideration of the delay.
The petitioner also submitted that its Electronic Cash Ledger had no balance and that it might be unable to make the pre-deposit unless the bank attachment under FORM GST DRC-13 dated 06.07.2026 was lifted.
Department’s Submissions
The Senior Standing Counsel for CBIC referred to the Supreme Court decision in Bhandari Scrap Traders and submitted that the validity of Section 16(2)(c) of the CGST Act had been upheld. The Department contended that the similar challenge raised in the writ petition should not be entertained.
The Department also submitted that the petitioner could pursue an appeal and raise all grounds available in law and on facts before the appellate authority.
High Court’s Observations
Since the petitioner sought to pursue the statutory appellate remedy, the High Court declined to comment on the merits of the parties’ contentions. Accordingly, the Court did not decide the petitioner’s challenges to Section 16(2)(c), Notification No. 79 of 2020, or the adjudication order.
Cases Discussed
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Sri Mohammad Shabaz, learned counsel appears for petitioner.
Sri Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs appears for respondent Nos.1, 2 and 4.
2. In this Writ Petition, the petitioner challenges show cause notice dated 24.09.2025 along with FORM GST DRC-01 dated 27.09.2025 and Order-in-Original along with FORM GST DRC-07 dated 25.12.2025, imposing tax, interest and penalty upon the petitioner for the tax period April, 2021 to March, 2022, under Section 73 of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’). Apart from laying a challenge to the aforesaid ground, the petitioner has also laid a challenge to Notification No.79 of 2020 dated 15.10.2020 amending Rule 142(1A) of the Central Goods and Services Tax Rules, 2017 (for short ‘CGST Rules’) and assailed the vires of Section 16(2)(c) of the CGST Act and sought a declaration that it is not liable to pay the amount for the default of its supplier.
3. Learned counsel for the petitioner submits that the decision of the Apex Court in Bhandari Scrap Traders v. Union of India [Special Leave to Appeal (C) No.23931 of 2026], filed against the order dated 01.05.2026 passed by Gujarat High Court in S.C.A.No.749 of 2025, deals with the amended Section 41 of the CGST Act which has come into force from 01.10.2022, whereas the present Writ Petition relates to the tax period 2021-22 and as such, the petitioner has independent grounds to assail the said provision.
4. However, after some arguments, learned counsel for the petitioner seeks liberty to the petitioner to prefer an appeal against the impugned Order-in-Original and Summary of the order in FORM GST DRC-07. He submits that some delay might have been occurred in approaching the appellate authority and therefore, he may be directed to consider it sympathetically.
5. Learned Senior Standing Counsel for CBIC has referred to the decision rendered by the Apex Court in Bhandari Scrap Traders (supra), wherein the validity of Section 16(2)(c) of the CGST Act has been upheld. It is submitted that on that ground, similar challenge made in the present Writ Petition should not be entertained. It is submitted that the petitioner may be granted liberty to prefer an appeal against the impugned orders by taking all the grounds as are available to the petitioner in law and on facts before the appellate authority in respect of the subject tax period.
6. Learned counsel for the petitioner submits that since there is no balance in the Electronic Cash Ledger, the petitioner may be prevented from making the pre-deposit for filing an appeal unless the bank attachment contained in FORM GST DRC-13 dated 06.07.2026 is lifted.
7. Upon hearing the learned counsel for the parties, since the petitioner seeks liberty to prefer an appeal, we do not wish to comment on the merits of the contentions raised by the parties.
8. Therefore, the petitioner may approach the appellate authority within a period of two weeks with a delay condonation application and statutory pre-deposit. It is made clear that if the Electronic Cash Ledger of the petitioner does not contain any balance for making the pre-deposit of the outstanding tax dues, the petitioner would be allowed to make payment from 10% of the said amount from its account under bank attachment vide FORM GST DRC-13 issued by the proper officer. The petitioner may take all such grounds of law and facts in the memo of appeal as are available to the petitioner. Needless to say, the appellate authority would consider the question of delay taking into account the aforesaid facts and circumstances and if he is satisfied on the point of delay, proceed to decide the appeal on merits in accordance with law.
9. Learned counsel for the petitioner is permitted to produce a copy of this order before the bank authorities for remittance of 10% of the tax dues from its account under attachment pursuant to FORM GST DRC-13 notice.
Accordingly, the instant Writ Petition is disposed of. There shall be no order as to costs.
Miscellaneous applications, if any pending, shall stand closed.
