Sadashiv S. Bennali Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court)
Summary : The Karnataka High Court allowed W.P.No.100867/2026 and W.P.No.100887/2026 concerning adjustment of Goods and Service Tax (GST) consequent to the coming into force of the Central Goods and Service Taxes Act, 2017 (CGST Act). The petitioners sought directions to the respondents to consider their representations in terms of the judgment dated 11.04.2023 in Chandrashekharaiah Vs. State of Karnataka, compute and pay differential GST along with interest and penalty in respect of works executed by them, and execute supplementary agreements incorporating the applicable GST rate component under the revision notification amending Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017.
It was jointly submitted by the learned counsel for the petitioners and the learned AGA that the issue concerned adjustment of GST following the introduction of the CGST Act. They referred to the earlier judgment in Chandrashekharaiah Vs. State of Karnataka, under which directions had been issued concerning calculation of pre-GST and post-GST works, applicable taxes, GST, input credit, differential tax and supplementary agreements.
The Court noted that the earlier judgment had subsequently been challenged before a Division Bench in Office of Principal Commissioner GST and Central Excise and others Vs R Chandrashekhar S/o. Ramaiah. The Division Bench partly allowed the appeals and held that the liability to pay GST was required to be determined strictly in accordance with the relevant statutory provisions. It further held that directions permitting revised returns contrary to statute and directions waiving penalty, interest or limitation for filing returns or revised returns could not be sustained. The Division Bench also held that the dispute regarding incremental tax burden was between the writ petitioners and their employers and that the direction to reimburse differential tax was to be construed as a direction to the concerned employers, not the tax authorities.
In view of the Division Bench judgment, the Karnataka High Court recorded that operative direction Nos. (v) and (vi) in Chandrashekharaiah had been set aside. The present writ petitions were consequently allowed in terms of operative direction Nos. (i), (ii)(a) to (ii)(f), (iii), (iv) and (vii) of the earlier judgment.
The Court further recorded that, since the petitioners had also impugned the assessment orders, they were at liberty to assail those orders in appropriate proceedings. The concerned authorities were directed not to take into account the period spent by the petitioners in prosecuting the present petitions. Pending interlocutory applications, if any, were also disposed of.
Petitioners’ Reliefs
In W.P.No.100867/2026, the petitioner sought a writ of mandamus directing the respondents to consider and dispose of the petitioner’s representations in terms of the judgment dated 11.04.2023 in Chandrashekharaiah v. State of Karnataka, compute and pay differential GST along with interest and penalty payable in respect of the works executed by the petitioner, and execute an appropriate supplementary agreement incorporating the applicable GST rate component under the revision notification amending Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017.
In W.P.No.100887/2026, substantially similar reliefs were sought, including consideration and disposal of the petitioner’s representations, computation and payment of differential GST along with interest and penalty, and execution of a supplementary agreement incorporating the applicable GST rate component under the revision notification.
Earlier Chandrashekharaiah Directions
The parties jointly referred to the judgment of the Co-ordinate Bench in Chandrashekharaiah Vs. State of Karnataka. The earlier order contained directions and guidelines concerning works contracts spanning the pre-GST and post-GST periods.
Calculation of Pre-GST and Post-GST Works
The earlier directions required calculation of works executed prior to 1-7-2017 under the KVAT regime and payments received for such works. The balance works completed or to be completed after 1-7-2017 were also required to be calculated.
The directions further contemplated deriving the rate of materials and KVAT items required or used for completing the balance works, deducting the KVAT amount from those materials and service tax, if applicable, adding applicable GST, and arriving at input credit on materials for set-off against output GST for those assessed under regular VAT.
Determination of Differential Tax and Supplementary Agreement
The earlier order directed that the tax difference on the balance works executed or to be executed after 1-7-2017 should be calculated separately. Based on the resulting calculation of the tax difference on the contract value, the concerned department or authority was to decide whether the agreement required alteration.
The earlier directions also contemplated a supplementary agreement for the revised GST-inclusive work value for the balance work completed or to be completed. Where the revised GST-inclusive work value exceeded the original agreement work value, the petitioners were to be paid or reimbursed the differential tax amount by the concerned employer. The earlier directions also addressed situations where payments for works completed pre-GST were made post-GST.
Effect of Division Bench Judgment
The Court noted that the judgment of the Co-ordinate Bench was challenged before the Division Bench in Office of Principal Commissioner GST and Central Excise and others Vs R Chandrashekhar S/o. Ramaiah.
The Division Bench held that whether the writ petitioners were entitled to reimbursement of incremental tax paid or payable due to the levy of GST was a matter between the writ petitioners and their employers. It observed that the contracts between the petitioners and employers would not alter the statutory scheme for levy of GST.
The Division Bench further held that the liability to pay GST, whether under the Central Goods and Services Tax Act, 2017, the State Goods and Services Tax Act, 2017 or the Integrated Goods and Services Tax Act, 2017, was required to be determined in accordance with the relevant statute. Levy, assessment, recovery and enforcement were matters of statutory prescription.
It consequently held that directions could not be issued permitting revised returns contrary to the statute. The plenary directions concerning waiver of penalty, interest under the GST Acts or limitation for filing returns or revised returns were also held unsustainable.
The Division Bench further held that no directions could be issued to tax authorities concerning levy, assessment and collection of tax, penalty or interest in the context of the dispute regarding incremental tax burden arising from the change in the tax regime. The direction concerning reimbursement of differential tax was required to be construed as a direction to the concerned employers and not to the tax authorities.
High Court’s Decision
In view of the Division Bench judgment, the Karnataka High Court held that operative direction Nos. (v) and (vi) of the earlier Chandrashekharaiah order had been set aside.
The present writ petitions were allowed in terms of operative direction Nos. (i), (ii)(a) to (ii)(f), (iii), (iv) and (vii) of the earlier judgment.
The Court also recorded that the petitioners had impugned the assessment orders. The petitioners were therefore given liberty to assail those assessment orders in appropriate proceedings. The concerned authorities were directed not to take into account the time period spent by the petitioners in prosecuting the present petitions.
Final Directions
The writ petitions were allowed in the terms specified by the Court. The earlier directions relating to calculation of pre-GST and post-GST works, determination of applicable tax components, calculation of differential tax and related directions were retained to the extent expressly specified by the Court, while operative direction Nos. (v) and (vi) of the earlier order had already been set aside by the Division Bench.
The petitioners’ challenge to the assessment orders was left open for appropriate proceedings. Pending interlocutory applications, if any, did not survive for consideration and were disposed of.
Cases Discussed
- Chandrashekharaiah Vs. State of Karnataka — Order dated 11.04.2023 in W.P.No.9721/2019
- Office of Principal Commissioner GST and Central Excise and others Vs R Chandrashekhar S/o. Ramaiah — Judgment dated 10.06.2026 in W.P.No.1587/2023 C/w W.A.No.1599/ 2023, W.A.No.1638/2023, W.A.No.1647/2023 & W.A.No.25/2024 : NC:2026 KHC:28975-DB
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The W.P.No.100867/2026 is filed seeking for the following reliefs:
“WHEREFORE, in the light of the above facts and grounds, the Petitioner humbly prays that this Hon’ble Court may be pleased to:
A. Issue a Writ of Mandamus directing the Respondents to consider and dispose of the Petitioner’s representations in terms of the judgment dated 11.04.2023 passed by this Hon’ble Court in Sri Chandrashekharaiah v. State of Karnataka (Annexure K), in a time bound manner and consequently compute and pay the differential GST along with interest and penalty payable in respect of the works executed by the Petitioner.
B. Issue a Writ of Mandamus directing the Respondents to execute an appropriate supplementary agreement incorporating the applicable GST rate component as is set out in the Revision Notification which amended Notification No. 11/2017-Central Tax (Rate), Dated 28-6-2017 (Annexure B) while also accounting for the interest and penalty imposed on the Petitioner under the Adjudication Order – DRC 07 Ref No: ZD2910251137560 dated 30.10.2025 by the Respondent No.1 (digitally signed version is produced as Annexure J); and
C. Grant such other order or direction as this Hon’ble Court may deem fit in the interest of justice and equity.”
2. The W.P.No.100887/2026 is filed seeking for the following reliefs:
“WHEREFORE, in the light of the above facts and grounds, the Petitioner humbly prays that this Hon’ble Court may be pleased to:
A. Issue a Writ of Mandamus directing the Respondents to consider and dispose of the Petitioner’s representations in terms of the judgment dated 11.04.2023 passed by this Hon’ble Court in Sri Chandrashekharaiah v. State of Karnataka (Annexure K), in a time bound manner and consequently compute and pay the differential GST along with interest and penalty payable in respect of the works executed by the Petitioner.
B. Issue a Writ of Mandamus directing the Respondents to execute an appropriate supplementary agreement incorporating the applicable GST rate component as is set out in the Revision Notification (Annexure F) which amended Notification No. 11/2017-Central Tax (Rate), Dated 28-6-2017 (Annexure B) while also accounting for the interest and penalty imposed on the Petitioner under the Adjudication Order – DRC 07 Ref No: ZD291025115172T dated 30.10.2025 by the Respondent No.1 (digitally signed version is produced as Annexure J); and
C. Grant such other order or direction as this Hon’ble Court may deem fit in the interest of justice and equity.”
3. It is jointly submitted by the learned counsel for the petitioner and the learned AGA that the question that arises for consideration in the present writ petitions is with regard to the adjustment of Goods and Service Tax (GST] consequent to coming into force of the Central Goods and Service Taxes Act, 2017 (CGST Act]. It is further submitted that a Co-ordinate Bench of this Court in the case of Chandrashekharaiah Vs. State of Karnataka1 has disposed of the writ petitions by issuing various guidelines. The operative portion of the said order is as under:
“ORDER
(i) Petitions are hereby disposed of.
(ii) The Respondents-State and other Govt agencies/Respondents who have entered into works contract with the Petitioners are issued the following directions/guidelines:-
(a) Calculate the works executed pre-GST (prior to 1-72017) under KVAT regime and payments received by the Petitioners.
(b) The payments received by the Petitioners pre-GST for such of the works executed before 1-7-2017 are to be assessed under KVAT tax regime – either under COT or VAT scheme as applicable.
(c) Calculate the balance works to be completed or completed after 1-7-2017, in the original contract.
(d) Derive the rate of materials, KVAT items required or used to complete the balance works.
(e) Deduct the “KVAT” amount from those materials and the service tax, if applicable.
(f) Add the applicable “GST” on those items.
(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT.
(h) Further, the “tax difference” should be calculated on such balance works executed or to be executed after 17-2017 separately.
(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.
(j) A supplementary agreement may be signed with the Petitioners for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 1-7-2017, is more than the original agreement work value, the Petitioners are to be paid/reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioners.
(iii) Petitioners are directed to submit comprehensive representations to the respective
employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order,
(iv) irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.
(v) If such representations are submitted, the respective employers/Respondents are directed to consider and dispose of the same in the light of the aforesaid directions/guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.
(vi) In view of the interim orders passed by this Court in the present petitions, such of the petitioners who had not filed their GST returns during the period after 1-72017 are permitted to file their returns/amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.
(vii) The GST authorities are also directed not to take precipitative action against the Petitioners for a period of 6 months from the date of receipt of a copy of this order.
(viii) Liberty is reserved in favour of the petitioners to challenge any order/decision passed/taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law.”
4. It is further jointly submitted that the judgment of the Co-ordinate Bench of the Court in the case of Chandrasekharaiah1 was the subject matter of challenge before the Division Bench of this Court in the case of Office of Principal Commissioner GST and Central Excise and others Vs R Chandrashekhar S/o. Ramaiah2. The Division Bench has partly allowed the said appeals. The operative portion of the order of the Division Bench is as under:
“8. The dispute as to whether the writ petitioners would be entitled to reimbursement of the incremental tax paid or payable by them on account of the levy of GST is strictly a matter between the writ petitioners and the Employers with whom they had entered into the contracts. The contracts between the writ petitioners and the Employers would not alter the statutory scheme for the levy of GST. Thus, the liability of the writ petitioners to pay Goods and Services Tax (whether under the Central Goods and Services Tax Act, 2017, the State Goods and Services Tax Act, 2017 or the Integrated Goods and Services Tax Act, 2017) is required to be determined strictly in accordance with the provisions of the relevant statute. The question of the levy of GST, assessment, recovery, and enforcement is a matter of statutory prescription.
9. In view of the above, no directions could be issued permitting the filing of any revised returns contrary to the provisions of the statute. The plenary directions to waive the penalty, interest under the GST Acts or the limitation for filing returns/revised returns are also unsustainable.
10. The controversy as to the incremental tax burden arising on account of the change in the tax regime is, in essence, one between the writ petitioners and the Employers. In the context of such a dispute, no directions could be issued to the tax authorities regarding the levy, assessment, and collection of tax, penalty, or interest.
11. In the aforesaid view, the direction issued to the respondents to reimburse the differential tax is required to be construed as a direction only to the concerned Employers and not to the tax authorities.
12. Accordingly, the impugned order, to the extent it issues directions to the tax authorities, is set aside. The appeal is disposed of in the aforesaid terms.”
5. In view of the judgment of the Division Bench, as referred above, the operative direction Nos.(v) and (vi) as ordered in case of Chandrashekharaiah1 have been set aside.
6. In view of the aforementioned, the present writ petitions are allowed in terms of the operative direction Nos.(i), (ii)(a) to (ii)(f), (iii), (iv) and (vii) as held in the case of Chandrashekharaiah1 as noted above.
7. Since the petitioner has also impugned the assessment orders in the present writ petitions, the petitioner is at liberty to assail the same in appropriate proceedings. The concerned authorities shall not take into account time period spent by the petitioner in prosecuting the present petitions.
8. In view of disposal of the writ petitions, pending interlocutory applications, if any, do not survive for consideration and are disposed of.
Notes:
1 Order dated 11.04.2023 in W.P.No.9721/2019
2Judgment dated 10.06.2026 in W.P.No.1587/2023 C/w W.A.No.1599/ 2023, W.A.No.1638/2023, W.A.No.1647/2023 & W.A.No.25/2024 : NC:2026 KHC:28975-DB
