Zeal Group Vs Deputy Commissioner of Commercial Taxes (Karnataka High Court)
Summary: The Karnataka High Court, in M/s. Zeal Group Vs Deputy Commissioner of Commercial Taxes (Audit)-5.9, considered a writ petition challenging a GST adjudication order and its summary in Form GST DRC-07, both dated 30 December 2025, relating to the tax period April 2021 to March 2022. The proceedings concerned a mismatch between Input Tax Credit reported in Forms GSTR-3B and GSTR-2A. The adjudicating authority had proceeded on the basis that the petitioner failed to respond to the show cause notice and had not availed the opportunities of personal hearing. The petitioner contended that the show cause notice uploaded on the GST portal, as well as reminder notices dated 14 May 2025, 10 July 2025 and 6 December 2025, had inadvertently remained unnoticed. Consequently, the petitioner could neither file a detailed reply with supporting records nor appear for the personal hearing. The petitioner sought quashing of the adjudication order and restoration of the proceedings to enable consideration of the documentary evidence and reconciliation explaining the alleged ITC mismatch.
The petitioner also relied upon the Karnataka High Court’s earlier decision in M/s. Instakart Services Pvt. Ltd. Vs Union of India and Others, W.P. No. 4917 of 2021, decided on 9 February 2026. The petitioner’s counsel submitted that the Court had read down Section 16(2)(c) of the CGST/KGST Act, 2017, and Rule 36(4) of the corresponding Rules, protecting bona fide recipients who had complied with the applicable conditions notwithstanding supplier defaults. The State, however, informed the Court that the Union of India had filed an intra-court appeal against the Instakart decision and that the State Government also proposed to challenge it. The State maintained that the question concerning the reading down of these provisions remained open. The High Court expressly declined to determine that substantive issue in the present writ petition.
Justice B. M. Shyam Prasad examined the circumstances surrounding service of the show cause notice and the opportunities stated to have been granted. The adjudication order referred to Form GST DRC-01 dated 23 July 2024 having been uploaded on the common GST portal without specifying other modes of communication of that notice. It also referred to opportunities of personal hearing without setting out full particulars, although the order recorded that reminders and communications had been made through the portal, registered email address and authorised mobile number. Having regard to the petitioner’s contention that the mismatch could be explained through reconciliation and supporting documents, the Court considered it appropriate to grant another reasonable opportunity of adjudication. The Court did not decide whether the claimed ITC was admissible or whether Section 16(2)(c) and Rule 36(4) should be read down.
Accordingly, the Karnataka High Court allowed the writ petition and quashed the adjudication order and summary order dated 30 December 2025, subject to specified conditions. The proceedings were restored to the respondent for fresh consideration, provided the petitioner deposited 10% of the tax in demand by 30 September 2026, subject to the outcome of the restored proceedings. The petitioner was permitted to submit a response to the show cause notice, a certified copy of the High Court’s order, documentary evidence establishing the genuineness of the transactions and the relevant reconciliation, also by 30 September 2026. The respondent was directed to examine these materials and conclude the proceedings through a reasoned order. The decision therefore grants procedural relief and an opportunity to substantiate the ITC claim, without determining the ultimate tax liability or the legal validity of the conditions governing input tax credit.
Cases Discussed
- M/s. Instakart Services Pvt. Ltd. Vs Union of India and Others (Karnataka High Court) – W.P. No. 4917 of 2021, order dated 09.02.2026. The petitioner relied on this decision concerning the reading down of Section 16(2)(c) of the CGST/KGST Act, 2017 and Rule 36(4) of the corresponding Rules in relation to bona fide recipients of supplies. The respondent submitted that the Union of India had filed an intra-court appeal and that the State Government also proposed an appeal. The High Court expressly left the substantive issue open and granted relief on the circumstances of the present case.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner is aggrieved by the Adjudication Order dated 30.12.2025 [Annexure-A] and the Summary of such Order [Annexure-A1]. The Adjudication order/ Summary is for the period between April 2021 to March 2022. The Adjudication Order is premised in the assertion that the Show Cause Notice is issued to the petitioner, but it has failed to file a response.
2. Sri Bhagavath P., the learned counsel for the petitioner, submits that the proceedings are concluded because of a mismatch between the Input Tax Credit paid and the details in Forms GSTR-3B and GSTR-2A and that the petitioner could not respond to either the intimation in Form GST DRC-01A or to the Show Cause Notice in Form GST DRC-01. The learned counsel invites this Court’s attention to the following averment in the memorandum of petition.
“The petitioner submits that the Show Cause Notice was not effectively responded to. The petitioner could not notice the Show Cause Notice uploaded on the GST portal and consequently could not submit a detailed reply explaining the factual position together with the supporting records.
Thereafter the Respondent issued three reminder notices dated 14.05.2025, 10.07.2025, and 06.12.2025. As these reminders were uploaded only on the GST portal, they inadvertently went unnoticed by the petitioner. Consequently, the Petitioner was unable to submit a proper reply or appear for the personal hearing in the present proceedings.”
3. Sri. Bhagavath P. also submits that this Court [in WP No. 4917/20211 – M/s Instakart Services Pvt. Ltd. V. Union of India and others] has read down Section 16[2][c] of the CGST/ KGST Act, 2017 and Rule 36[4] of the CGST/ KGST Rules, 2017 allowing the benefit of ITC to bonafide recipients/RTP provided that such recipient/person has complied with all conditions under these provisions even of there is any default by a supplier.
4. Sri K Hema Kumar, a learned Additional Government Advocate for the respondent, is heard for the disposal of the petition. The learned Additional Government Advocate submits that the Union of India has filed an intra- court appeal as against the decision in M/s Instakart Services Pvt. Ltd. V. Union of India and others [supra] and that State Government also proposes to file its own appeal. The learned Additional Government Advocate emphasizes that the question whether there could be reading down of the afore provisions is thus still at large.
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.
Note
1 This Court’s order is dated 09.02.2026
