Fresh GST Proceedings Invalid While Earlier Restored Adjudication Pending: Karnataka HC

V R Sundara Murthy Vs Commercial Tax Officer & Ors. (Karnataka High Court)

Summary: Karnataka High Court allowed the writ petition filed by M/s V R Sundara Murthy and quashed the fresh show cause notice dated 15 April 2026, its summary dated 21 April 2026 and the adjudication order dated 20 June 2026 issued under Section 73 of the KGST Act. The Court noted that proceedings arising from an earlier show cause notice dated 28 November 2024 had already been restored by its order dated 4 June 2025 in W.P. No. 15596/2025 with a direction to consider the petitioner’s reply dated 26 December 2024 for complete adjudication.

Those restored proceedings remained pending when the first respondent initiated another proceeding and passed the impugned adjudication order. The petitioner contended that the fresh proceedings could not have been commenced or concluded without first completing the restored adjudication, particularly when the earlier reply had not been considered. The Revenue sought relegation of the petitioner to the alternative remedy, relying upon the retrospective applicability of the amendment introduced through the Finance Act, 2025 concerning Section 17(5)(d).

The High Court held that, in view of its earlier order, the authority was required to conclude the restored proceedings after considering the petitioner’s response and giving an opportunity to submit a further response regarding retrospective application of the amendment. Consequently, the fresh proceedings could not be sustained. The Court directed the first respondent to issue a fresh hearing notice in the restored proceedings, consider the reply dated 26 December 2024 as well as any response concerning retrospective application of the amendment, and also decide whether the restored adjudication could remain open after the passage of several months.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

The short question for consideration is whether the first respondent could have commenced another proceedings with the issuance of the Show Cause Notice dated 15.04.2025 [sic] and concluded such proceedings with the Adjudication Order dated 20.06.2026 when the proceedings under the earlier Show Cause Notice 28.11.2024, restored by this Court’s order dated 04.06.2025 in the writ petition in W.P. No.15596/2025, are pending.

2. This question is presented by the petitioner calling in question the following:

This Court, on 04.06.2025 in W.P. No.15596/2025, while recording the grounds urged as against the commencement of the proceedings under the Show Cause Notice dated 28.11.2024, has restored the proceedings observing that the petitioner’s Reply dated 26.12.2024 is not considered and should be considered for a complete adjudication.

3. Sri B G Chidananda Urs, the learned counsel for the petitioner, relying upon the aforesaid circumstances, submits the following.

(A) The restored proceedings are still pending consideration,

(B) The first respondent could not have issued the present Show Cause Notice or completed the proceedings with the impugned Adjudication Order dated 20.06.2026 without an Adjudication Order in such proceedings in the light of this Court’s observation that the adjudication must be considering the contents of the Reply dated 26.12.2024,

(C) The first respondent has referred to this Court’s Order dated 04.06.2025 in extracting the order in its entirety and also the petitioner’s Response in the light of such order but has proceeded to issue Show Cause Notice and the Adjudication Order only in view of the amendment without considering the Reply,

(D) The first respondent should consider the petitioner’s case that the proceedings must fail, amongst others, because the restored proceedings are not completed within six months from the date fixed by this Court in the Order dated 04.06.2026.

Ms. Malavika Prasad, a learned High Court Government Pleader, submits that this Court may not take any exception with the initiation of the proceedings or the Adjudication Order and relegate the petitioner to the alternative remedy because the amendment vide Finance Act 2025 is retrospectively applicable.

4. However, this Court must observe that it was incumbent upon the first respondent, in view of this Court’s order dated 04.06.2025 in W.P. No.15596/2025, to conclude the restored proceedings in the light of the petitioner’s Response and with an opportunity to the petitioner to file another Response in the light of the amendment against the initiation of fresh proceedings. In this Court’s considered view that the proceedings under the Show Cause Notice dated 15.04.2025 cannot be sustained. Hence the following:

ORDER

a. The petition is allowed;

b. The following impugned Show Cause

Notice/Summary of Show Cause Notice/Adjudication Order stand quashed.

[c] It is observed that the first respondent shall cause fresh Notice of hearing in the proceedings restored in terms of this Court’s order dated 04.06.2025 in W.P. No.15596/2025 to the petitioner and conclude the proceedings in the light of the petitioner’s Response dated 26.12.2024 and the possible Response that could be as against applying the amendment retrospectively.

[d] This Court must observe that the first respondent for a complete adjudication will also have to decide on the restored adjudication proceedings remaining open for adjudication after all these months.