Vayu Constructions Vs Assistant Commissioner of Commercial Taxes & Ors. (Karnataka High Court)
Summary: The Karnataka High Court, Dharwad Bench, in M/s. Vayu Constructions Vs Assistant Commissioner of Commercial Taxes & Ors., allowed a writ petition challenging the cancellation of the petitioner’s GST registration and subsequent show cause notices issued under Section 74 of the GST Act. The petitioner, a proprietary construction concern, had its GST registration cancelled on 26 December 2022. During a subsequent inspection, the tax authorities found that the petitioner was continuing business activities without GST registration and initiated proceedings under Section 74. Consequently, show cause notices dated 28 March 2026 were issued concerning the tax periods 2021-22, 2023-24 and 2024-25. The petitioner challenged both the cancellation order and these notices, contending that unless its GST registration was restored, it could not submit the requisite GST returns, discharge outstanding tax liabilities and penalties, or effectively respond to the departmental proceedings.
During the hearing, counsel appearing for the respondents relied upon the earlier Karnataka High Court decision in Sri T.V. Basavaraju Vs Superintendent of Central Tax and Another, W.P. No. 21725/2024, decided on 28 August 2024. In that case, a Coordinate Bench had quashed the cancellation of GST registration and directed its restoration within a stipulated period, subject to the taxpayer filing GST returns and paying outstanding taxes. The Court considered this precedent while examining whether the petitioner should receive a further opportunity to comply with the GST law.
Justice T.M. Nadaf observed that the reasons advanced by the petitioner were not satisfactory for condoning its compliance lapses. Nevertheless, considering the constitutional protection relating to the freedom to carry on a profession, occupation, trade or business and the right to life under Articles 19 and 21 of the Constitution, the Court considered it appropriate, in the interest of justice, to grant a one-time opportunity. The relief was made conditional upon payment of ₹35,000 to the Army Women’s Welfare Association (AWWA) Corpus Fund within three weeks. The Court accordingly quashed the GST registration cancellation order dated 26 December 2022 and the show cause notices dated 28 March 2026 issued under Section 74. The respondents were directed to reinstate or restore the petitioner’s GST registration within four weeks, subject to the petitioner filing the requisite GST returns and paying up-to-date tax within four weeks from receipt of the order. The decision therefore granted conditional relief to facilitate restoration of GST compliance rather than treating the petitioner’s earlier defaults as automatically excused.
Cases Discussed
1. Sri T.V. Basavaraju Vs Superintendent of Central Tax and Another (Karnataka High Court); W.P. No. 21725/2024; 28/08/2024. The Coordinate Bench had quashed the GST registration cancellation order and directed restoration of registration within a prescribed time, subject to filing GST returns and paying up-to-date tax. The judgment was relied upon in support of granting conditional restoration to the petitioner.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This Writ Petition is filed seeking the following reliefs:
“i) Issue Writ of nature of Certiorari quashing the impugned order of cancellation of registration dated 26/12/2022 vide order reference No.ZA291222216812R, passed by respondent no.7 vide ANNEXURE – ‘A’ to the writ petition.
ii) Issue Writ of nature of Certiorari quashing the impugned Show Cause Notice the respondent No.1 has issued a Show Cause Notice U/s 74 (1) (5) (8) of the Act for the tax period 2021-22 dtd: 28/03/2026, issued by respondent No.1 vide ANNEXURE – ‘B and B1’ respectively to the writ petition.
iii) Issue Writ of nature of Certiorari quashing the impugned Show Cause Notice the respondent No.1 has issued a Show Cause Notice U/s 74 (1) (5) (8) of the Act for the tax period 2023-24 dtd: 28/03/2026, issued by respondent No.1 vide ANNEXURE – ‘C and C1’ respectively to the writ petition.
(iv) Issue Writ of nature of Certiorari quashing the impugned Show Cause Notice the respondent No.1 has issued a Show Cause Notice U/s 74 (1) (5) (8) of the act for the tax period 2024-25 dtd: 28/03/2026, issued by respondent no.1 vide ANNEXURE – ‘D and D1’ respectively to the writ petition.
v) Issue Writ of Mandamus or in the like nature of Mandamus or direction to the respondent No. 1, or alternatively direct the respondent No.1 to open the portal of the petitioner.
(iv) pass such other or further orders as this Hon’ble Court may deem fit in the facts and circumstances of this case, in the interest of justice and equity.”
2. The main grievance of the petitioner in this Writ Petition that the GST registration has been cancelled in the year 2022. However, subsequent to that, the authorities found on inspection that the petitioner was carrying on the business without the GST and initiated the proceedings as contemplated under Section 74 of the GST Act.
3. The grievance of the petitioner is that without the order of cancellation of GST is being recalled, he is not in a position to submit the returns and pay all the taxes and penalties in terms of law and reply to the notice issued under Section 74 of the Act, notice.
4. Sri Girish S. Hulmani, learned counsel appearing for respondent No.2, relied on the judgment of another Coordinate Bench of this Court in the case of SRI.T.V.BASAVARAJU VS. SUPERINTENDENT OF CENTRAL TAX AND ANOTHER in W.P.No.21725/2024 disposed of on 28.08.2024, wherein the Coordinate Bench though quashed the order of cancellation of GST registration, directed the respondent to reinstate and restore the GST registration of the petitioner in a time bound manner subject to the petitioner filing GST returns and paying up-to-date tax within the time frame fixed, with further directions.
5. Though the reasons stated in the petition are not satisfactory to condone the lapses on the part of the petitioner, however, in the interest of justice, considering the fact that the right involved is a constitutional right guaranteed under Article 19(g) of the Constitution of India, to practice any profession or to carry out any occupation, trade or business and also the right to life as enumerated under Article 21 of the Constitution of India, one time opportunity is afforded, however, subject to payment of cost of Rs.35,000/- to the Army Women’s Welfare Association (AWWA) Corpus Fund, within three weeks from today.
6. Accordingly, this Court proceeds to pass the following:
ORDER
i. The Writ Petition is allowed.
ii. The impugned order at Annexure-A dated 26.12.2022 passed by respondent No.7 and impugned Show cause notices dated 28.03.2026 vide Annexures-B, B1, C, C1, D and D1 respectively issued by respondent No.1, are hereby quashed.
iii. The respondents are directed to reinstate/restore the GST registration of the petitioner within four weeks from today, subject to the petitioner filing GST returns and paying up to date tax within the aforesaid period of four weeks from the date of receipt of a copy of this order.
