Karnataka HC Quashes GST Demand as Email Notice Confusion Prevented Effective Hearing

Raashi Constructions Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court)

Summary: The Karnataka High Court, presided over by Justice B. M. Shyam Prasad, partly allowed the writ petition filed by M/s Raashi Constructions challenging an adjudication order dated 10 December 2025, its summary, and a garnishee notice dated 31 July 2026 concerning the tax period April 2021 to March 2022. The adjudication order had confirmed the show cause notice proposal on the ground that the petitioner had not availed the opportunities provided through the show cause notice and personal hearing, and that the proceedings could not remain pending indefinitely because of the petitioner’s non-appearance.

The petitioner explained that communications relating to the proceedings had allegedly been sent to changing email addresses of the auditor’s staff, and that it was unaware of the email addresses to which notices had been sent. Consequently, it claimed that it lacked effective knowledge of the proceedings and could not submit its records and reconciliation. On merits, the petitioner contended that payments received, as confirmed by the Garrison Engineer (Air Force), included GST/TDS at 12%, that the entire receipts had been declared in Form GSTR-7 and GST at 12% in Form GSTR-3B, and that reconciliation would establish no mismatch or, at most, a marginal mismatch.

Considering the reasons for non-participation and the petitioner’s case on merits, the Court held that another opportunity should be granted before enforcing the demand. It observed that the reconciliation statement should be considered to determine whether the alleged mismatch could be justified, thereby avoiding prolonged litigation and an unjustified liability. The Court quashed the adjudication order, its summary, and the garnishee notice, restoring the proceedings and permitting the petitioner to respond to the show cause notice dated 22 September 2025. The petitioner was directed to file its response with detailed reconciliation before the respondent on 11 November 2026, without further notice, and to deposit 10% of the GST tax by that date, subject to the outcome of the restored proceedings.

The petitioner has called in question the following which are for the tax period between April 2021 and March 2022.

The respondent has confirmed the Show Cause Notice proposition by the impugned Adjudication Order observing that the petitioner has not availed the opportunities extended with the issuance of the Show Cause Notice and the intimation of personal hearing and that the proceedings cannot be kept indefinitely due to the petitioner’s non-appearance.

2. The petitioner has stated thus on the reason for not participating in the adjudication proceedings.

“In this regard, the petitioner submits that the communications relating to the proceedings were purportedly issued to e-mail addresses of the staff of the Petitioner’s auditor and that has undergone changes from time to time. In fact, the Petitioner is not aware of the email addresses to which the notices are sent. Nor is this information forthcoming from the notices or the impugned order. Consequently, the Petitioner did not have effective knowledge of the adjudication proceedings so as to place its records and reconciliation pertaining to the alleged discrepancy before the adjudicating authority.”

3. Mr. Madhusudhan P., the learned counsel for the petitioner, while emphasizing the aforesaid circumstances to plead bonafides on behalf of the petitioner for interference with the impugned Adjudication Order and an opportunity to show cause against the proposition, submits the following to support the request for interference.

[A] The petitioner, as confirmed by the Garrison Engineer [Air Force] as per Annexure-C1, has received payments inclusive of GST/TDS at 12%. The petitioner, therefore, in Form GSTR-7, has declared the entire receipt declaring the GST at 12% in Form GSTR-3B.

[B] The reconciliation would demonstrate that there is no mismatch in Form GSTR-3B and Form GSTR-7, and even if there could be, it will only be a marginal mismatch, but not as alleged.

4. Mr. Madhusudhan P. proposes to rely upon a reconciliation statement [Annexure-D] and the statements made by the respondent in the Adjudication Order. Ms. Malavika Prasad, a learned High Court Government Pleader, who is called upon to accept notice for the respondents, is heard on whether this Court must intervene on the ground of the petitioner showing bona fides for non-participation in the adjudication proceedings.

5. The reasons assigned for the non-participation and the petitioner’s case on merits as afore persuades this Court to opine that the petitioner must have another opportunity before there can be a demand in terms of the impugned Adjudication Order. This Court opines that if indeed the petitioner can, based on the reconciliation as per Annexure-D, justify a cause against the alleged mismatch to any extent that must be considered for complete adjudication to avoid protracted litigation and avoid liability that may not be justified in law. In the light of the afore, the following:

ORDER

[A] The petition is allowed-in-part.

[B] The impugned Adjudication Order/Summary thereof and the Garnishee Notice as in terms of the details below are quashed restoring the proceedings with opportunity to the petitioner to file Response to the Show Cause Notice dated 22.09.2025.

[C] The petitioner without further notice shall file Response along with the detailed reconciliation with the respondent on 11.11.2026.

[D] The petitioner shall also by this date deposit 10% of the tax GST subject to the outcome in the restored proceedings.