Shifa Scrap Traders vs. Deputy Commissioner Of Commercial Taxes
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Cause title — parties, addresses and appearances
ORAL ORDER
The petitioner's grievance is with the Adjudication Order dated 26.11.2025 [Annexure - A] under Section 74 of the Karnataka Goods and Services Tax Act, 2017/Central Goods and Services Tax Act, 2017 [for short, 'the KGST/CGST Act']. The petitioner has called in question this Order dated 26.11.2025 as also the summary of this order [Annexure - B].
The petitioner is issued with Intimation in Form GST DRC-01A dated 20.06.2025 [Annexure - D] for the tax period 2018-19 referring to inspection of the petitioner's place of business by the Commercial Tax Officer (Enf)-01, South Zone, Bangalore on 09.05.2025 and referring to mismatch in the GSTR-2A and GSTR- 3B. The petitioner is subsequently issued with Show Cause Notice dated 25.06.2025 in From GST DRC-01 reiterating the same, and the proceedings are concluded because the petitioner has not responded HC-KAR
CNR: KAHC010499372026 NC: 2026:KHC:39137 either to the Intimation in Form GST DRC-01A or to the notice in Form GST DRC-01. 3. Mr. E. I. Sanmathi, the learned counsel for the petitioner, canvasses that the Adjudicating Officer, in the absence of an allegation of fraud or deliberate misstatement, could not have assumed juri iction to initiate proceedings under Section 74 of the KGST/CGST Act. The learned counsel emphasizes that neither the Intimation nor the Show Cause Notice indicate any circumstance that would justify a reasonable inference of fraud or misrepresentation or deliberate mistake and these only refer to the text of the provision. On the merits of the alleged mismatch between the details in GSTR-2A and GSTR-3B, the learned counsel submits that: the petitioner can show cause against the mismatch in filing the reconciliation and the petitioner could not file such reconciliation HC-KAR
CNR: KAHC010499372026 NC: 2026:KHC:39137 earlier because the petitioner did not know about the proceedings, and the petitioner has secured all the records now and can produce these documents to justify its defense against mismatch.
Mr. K. Hema Kumar, the learned Additional Government Advocate who accepts notice for the respondents and who is assisted by Ms. Malavika Prasad, a learned High Court Government Pleader, submits that when there is a specific reference to inspection of the petitioner's place of business by the concerned and the provisions of Section 74 of the KGST/CGST Act are invoked alleging fraud and deliberate misrepresentation, the petitioner, who has not participated in the proceedings, cannot call in question such initiation. When queried on the petitioner providing reconciliation to explain the alleged mismatch with the supporting documents, the learned Additional Government Advocate submits that HC-KAR
CNR: KAHC010499372026 NC: 2026:KHC:39137 because the proceedings are for the assessment year 2018-19, the petitioner can avail the benefit of Circular No.183 and file reconciliation.
The circumstances are examined to decide on the terms of interference with the impugned Adjudication Order. The materials on record indicate that the petitioner was served with the Intimation/Show Cause Notice only on E-mail and there is no reference to other modes of service. The petitioner contends that it is in receipt of documents which can justify a reconciliation of the mismatch between the details in GSTR-2A and GSTR-3B but could not produce it in the proceedings as the petitioner was not served. These circumstances provide reason for interference to restore the proceedings, especially when the Circular is issued enabling such reconciliation. HC-KAR
CNR: KAHC010499372026 NC: 2026:KHC:39137
However, insofar as the petitioner's grievance with the very initiation of the proceedings under Section 74 of the KGST/CGST Act, this Court is not inclined to make any observation as that is an aspect that should be considered in the light of the explanation that the petitioner could offer in terms of the liberty now reserved. Hence, the following.
ORDER
The petition is allowed and the Adjudication Order dated 26.11.2025 [Annexure-A] is quashed subject to the following terms. [a] The proceedings are restored to the first respondent for due consideration subject to the petitioner depositing 10% of the tax in demand by 05.10.2026 subject to the outcome in the restored proceedings. HC-KAR
CNR: KAHC010499372026 NC: 2026:KHC:39137 [b] The petitioner is permitted to file, along with the certified copy of this Order, its Reply and the copies of the documents to show the genuineness of the transactions along with the reconciliation in response to the Show Cause Notice dated 25.06.2025 in From GST DRC-01. [c] The petitioner shall file response and produce the documents by 05.10.2026 and the first respondent shall consider these documents and then conclude the proceedings by a reasoned order. (B M SHYAM PRASAD) JUDGE RB, SA
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.