King Enterprise Vs Assistant Commissioner of Commercial Taxes (Audit) (Karnataka High Court)
Summary: The petitioner, M/S. King Enterprise, a registered proprietorship concern engaged in ferrous waste and scrap trade, including remelting scrap ingots of iron or steel, challenged the adjudication order dated 29.04.2026 and the corresponding summary order in Form GST DRC-07. The adjudication officer had determined tax as well as penalty at Rs.91,00,384/- and provided that payment of tax, interest and reduced penalty of 50% within thirty days would conclude the proceedings, failing which the full 100% penalty would become payable. The order also stated that penalty equivalent to 100% of the tax liability would apply under each Act if the tax and interest were not paid within the prescribed period under Section 74(9) of the GST Act, 2017.
The petitioner stated that a show cause notice in Form GST DRC-01 dated 09.12.2025 proposed reversal of Input Tax Credit. According to the petitioner, the show cause notice, reminders and communications fixing personal hearing were uploaded only on the common GST portal. Because the petitioner’s GST consultant had changed during the relevant period and the portal communications remained unnoticed, the petitioner could not submit an effective reply or appear during adjudication. Reminders dated 13.01.2026, 06.02.2026 and 26.02.2026 were also stated to have been uploaded on the portal. The proceedings consequently proceeded ex-parte and resulted in the demand of Rs.91,00,384/-. The adjudication related to the period April 2023 to March 2024.
The petitioner relied upon the Karnataka High Court’s coordinate-bench decision in M/S. Zeal Group, W.P. No.24780/2026, disposed of on 12.08.2026, where proceedings had been restored after the Court found circumstances warranting another reasonable opportunity, subject to deposit of 10% of the tax in demand. The petitioner submitted that the documents could explain the mismatch between GSTR-3B and GSTR-2A and that, in the present case, the supplier had filed returns although its registration had subsequently been cancelled.
The respondent-State opposed the petition, contending that the communications were not confined to the common GST portal and had also been sent through email and post. It was submitted that sufficient opportunity had been afforded and that the petitioner had failed to avail it, justifying adjudication on the available documents. The Court, however, noted that when specifically asked, the learned AGA was unable to point out the documents allegedly sent by email or post apart from the portal communications. The Court therefore considered that the show cause notice and subsequent communications, including demand-related communications, had remained uploaded on the common GST portal and unnoticed by the petitioner.
The Court nevertheless observed that the petitioner should have been more circumspect and cautious in maintaining records and dealing with State revenue authorities. At the same time, it held that the matter could not be allowed to remain ex-parte without an opportunity contemplated under the GST law. The Court considered the coordinate-bench decision in M/S. Zeal Group, including its approach of restoring proceedings subject to a 10% deposit and permitting the taxpayer to place the relevant documents and reconciliation before the adjudicating authority.
In the present matter, the Court accepted that the petitioner’s stated explanation concerning the supplier’s returns and subsequent cancellation of registration could be placed before the adjudicating authority if an opportunity for adjudication were restored. Following the coordinate-bench decision, the Court allowed the writ petition. The adjudication order and summary order dated 29.04.2026 were quashed. The proceedings were restored to the respondent, subject to the petitioner depositing 10% of the tax in demand on or before 05.10.2026, subject to the outcome of the restored proceedings. The petitioner was permitted to file a response to the show cause notice together with the certified copy of the Court’s order, documents showing the genuineness of the transactions and reconciliation. The documents were required to be produced by 05.10.2026, after which the respondents were directed to consider them and conclude the proceedings by a reasoned order within two months thereafter.
Cases Discussed
- M/S. Zeal Group Vs Deputy Commissioner of Commercial Taxes (Audit)-5.9 — W.P. No.24780/2026, disposed of on 12.08.2026.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This Writ Petition is filed seeking following relies:
“WHEREFORE, it is respectfully prayed that this Hon’ble Court may be please to:
a. To issue order(s), direction(s), wirt(s), in the nature of Certiorari quashing the Order-in-Original bearing Ref No.ACCT/ADT/GDG/DRC-07/2026-27/B issued by the respondent dated 29.04.2026 enclosed as Annexure-A, to the extent pre-judicial to the petitioner;
b. To issue order(s), direction(s), writ(s) in the nature of Certiorari quashing the summary order in Form DRC – 07 bearing Reference No. ZD290426150046E dated 29.04.2026, issued by respondent as Annexure-A1, to the extent pre-judicial to the Petitioner;
c. To issue order(s), directions, writ(s) in the nature of Mandamus directing the Respondent to adjudicate the matter afresh after affording the Petitioner a reasonable and effective opportunity of personal hearing, duly considering the replies filed by the Petitioner together with all documentary evidence and submissions, and thereafter pass a reasoned and speaking order in accordance with law;
d. To issue order(s), directions(s), writ(s) in the nature of Mandamus directing the Respondent to holding that no interest and penalty is payable by the Petitioner under the Impugned Order enclosed at Annexure-A;
e. To issue order(s), directions(s), writ(s) or any other relief as this Hon’ble Court deems it fit and proper in the facts and circumstances of the case in the interest of justice.”
2. The Adjudication Officer has passed the Order in Original vide Annexure-A dated 29.04.2026, whereby adjudicated the Tax as well as Penalty at Rs.91,00,384/-. Further ordered that, if the taxpayer pays the tax, interest and a reduced penalty of 50% within thirty days of receiving the order, the proceedings are concluded. Failure to pay within the timeframe, results in full 100% penalty being payable and potential recovery proceedings.
3. Further directed that, along with the above tax liability, the taxpayer is also liable to pay penalty equivalent to 100% of the tax liability under each act, if failed to pay the tax and interest as per the above table within 30 days’ of issue of DRC-07 as per Section 74(9) of the GST Act, 2017.
4. Heard Sri.Bhagwati P., learned counsel appearing for the petitioner and Smt.Nandini Somapur learned AGA for the respondent/state.
5. Facts germane to file the present petition are as under:
5.1 The petitioner is a registered Proprietorship concern, engaged in the business of ferrous waste and scrap trade, including remelting scrap ingots of iron or steel, and has been regularly carrying on business under the GST regime holding GSTIN: 29ALHPK4646E3ZX.
5.2 A show cause notice was issued on 09.12.2025 by the respondent in Form GST DRC-01 bearing Reference No.ZD291225080066C, proposing reversal of Input Tax Credit.
6. As per Sri.Bhagwati P., the show cause notice and all subsequent communications, including reminders fixing a personal hearing were uploaded only on the common GST portal. Owing to a change in the petitioner’s GST consultant during the relevant period and the fact that the communications remained unnoticed on the portal, the petitioner could neither submit an effective reply nor appear before the Respondent during the adjudication proceedings.
7. Though several reminders were issued by the respondent on 13.01.2026, 06.02.2026 and 26.02.2026, but all were uploaded only on the GST portal. As stated supra, since the communications were unnoticed, the petitioner remained unaware of the proceedings and in consequence thereof, he did not participate in the adjudication. In that view of the matter, the entire proceedings went in ex-parte, passing the Order in Original determining the Tax as well as Penalty payable to the extent of Rs.91,00,384/-.
8. This case pertains to the adjudication orders/summary for the period between April-2023 to March-2024.
9. Bhagavati P., in support of his case referred and relied on the judgment of Co-ordinate Bench of this Court in W.P.No.24780/2026 disposed on 12.08.2026 in the case of M/S. ZEAL GROUP VS. DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT)-5.9, (M/S. ZEAL GROUP) and submits that, the Coordinate Bench of this Court, in the similar circumstances, considering the case of the petitioner allowed the Writ Petition, quashed the Order in Original passed by the respondent and remitted the matter, restoring the proceedings on the file of respondent for due consideration subject to petitioner depositing 10% of the Tax in demand, within the period granted by the Court, which is subject to the outcome of the restored proceedings and permitted the petitioner to file response to the show cause notice along with the copy of the order and the copies of the documents to show the genuineness of transactions.
10. Smt. Nandini Somapur, learned AGA would submit that the contention of Sri.Bhagavati.P., that all communications are uploaded only in the common GST portal, are not tenable. Apart from uploading the dates of the reminders, communications, show cause notice and fixing the date of personal hearing in common GST portal, the same are also communicated through email as well as post. In that view of the matter, the contention of the petitioner does not hold any water. She further submits that the authority passed the Order in Original, after affording sufficient opportunity, which was not availed by the petitioner. In these circumstances, the authority proceeded to pass the order on the available documents. As such, the same does not call for any interference by this Court.
11. Having considered the rival submissions, this Court has perused the entire writ petition papers.
12. To the query of the Court, learned AGA is unable to point out the documents which has been sent by way of e-mail as well as post, apart from uploading the same in common GST portal. In that view of the matter, this Court has to consider that, the show cause notices and subsequent communications including demand and other things were uploaded only on the common GST portal and that, as contented by the learned counsel, Sri.Bhagavati P., were remained unnoticed.
13. The petitioner should have been more circumspect and cautious while maintaining his documents and records, so also the dealings with the State Revenue Authorities. The matter pertains to revenue of the State, however, at the very same time, it cannot be lost sight that, the entire matter went ex-parte without affording an opportunity under law as per the provisions contained in the GST Act, 2017.
14. The Coordinate Bench of this Court in the case of M/S. ZEAL GROUP (supra), upon consideration of the rival submissions, allowed the Writ Petition, restoring the proceedings subject to the petitioner depositing 10% of the tax in demand. The relevant paragraphs finds place in paragraph Nos.5 and 6, read as under:
“5. This Court, in the circumstances, examines whether the petitioner must be admitted to another reasonable opportunity based on the peculiarities of the case. The respondent has referred to the Show Cause Notice in GST DRC-01 dated 23.07.2024 being uploaded on the common portal according to the Act without mentioning the other modes of communication of the Show Cause Notice. The respondent has also referred to an opportunity of personal hearing being extended to the petitioner observing that the petitioner has not availed this opportunity but without further details of the opportunity so extended. The relevant part of the Adjudication Order read thus.
“In view of natural justice three opportunities of time and personal hearing was offered vide ref (3,4 and 5). Further all the correspondence was done through GST common portal which enables the RTP to view the notices or correspondence done on their personal dashboard. However the RTP has not responded. In addition, an email was also sent to the registered email address vide reference
(6). Despite receipt of the show cause notice, the Designated Authorized Representative (DAR) of the taxpayer failed to file any reply. The undersigned also sent communications to the authorized email address and contacted the authorized mobile number as uploaded on the portal. However, no response was received and no reply was submitted.”
6. The petitioner contends that the mismatch between Forms GSTR-3B and GSTR-2A can be explained with the support of the documents, When all the circumstances are considered, this Court is of the view that the petition must be disposed of extending another opportunity to the petitioner without expressing any view on reading down Section 16[2][c] of the CGST/ KGST Act, 2017 and Rule 36[4] of the CGST/ KGST Rules, 2017. Hence, the following
ORDER
The petition is allowed and the Adjudication Order dated 30.12.2025 [Annexure-A] and Summary of the Order dated 30.12.2025 [Annexure-A1] are quashed subject to the following terms.
a. The proceedings are restored to the respondent for due consideration subject to the petitioner depositing 10% of the tax in demand by 30.09.2026 subject to the outcome in the restored proceedings.
b. The petitioner is permitted to file a response to the Show Cause Notice along with a certified copy of this Order and the copies of the documents to show the genuineness of the transactions along with the reconciliation.
c. The petitioner shall produce these documents by 30.09.2026 and the respondent shall consider these documents and then conclude the proceedings by a reasoned order.”
15. In the case on hand too, the petitioner submits that mismatch between the forms GSTR-3B and GSTR-2A can be explained with the support of the documents and in the case on hand, the supplier has filed the returns, however, his registration was cancelled, the said facts were not brought to the notice of the authority before passing an Order. If the matter is remanded and an opportunity is granted, the same would be explained and satisfied in terms of the provisions contemplated under the GST Act, 2017.
16. Considering the submissions and in view of the order passed by the Co-ordinate Bench of this Court, M/S. ZEAL GROUP (supra), the petition deserves to be allowed.
17. In the result, I proceed to pass the following:
ORDER
i. The petition is allowed and the adjudication order and summary order dated 29.04.2026 passed in Ref No.ACCT/ADT/GDG/DRC-07/2026-27/B are hereby quashed.
ii. The proceedings are restored to the file of respondent for due consideration subject to the petitioner depositing 10% of the tax in demand on or before 05.10.2026 subject to the outcome in the restored proceedings.
iii. The petitioner is permitted to file a response to the show cause notice along with the certified copy of this order and the copies of the documents to show the genuineness of the transactions along with the reconciliation.
iv. The petitioner shall produce the documents by 05.10.2026 and the respondents shall consider the documents and then conclude the proceedings by a reasoned order within two months thereafter.
