M/S Chahana Enterprises vs. The Joint Commissioner Of Central Tax
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Cause title — parties, addresses and appearances
ORAL ORDER
The petitioner's GST registration is cancelled, and the petitioner is aggrieved by the Penalty Order dated 23.12.2025 [Annexure-F]. Sri Shreehari Kutsa, the learned counsel for the petitioner, submits that this Court must interfere with the impugned Penalty Order and all other consequential Demands in the following circumstances. [a] The petitioner has applied for amendment of the registration which was rejected by the Authorities vide the order dated 10.10.2024. In the meantime, the Authorities also passed orders for cancellation of the petitioner's registration. [b] This Court, by Order dated 04.02.2026 in the writ petition in W.P. No.3324/2026 which is filed calling in question the Order dated 10.10.2024, has restored the proceedings for reconsideration interfering with both the order dated 10.10.2024 and the order to cancel the HC-KAR NC: 2026:KHC:32574 registration. These proceedings are still pending consideration. [c] When the proceedings for cancellation of registration in the light of the petitioner's application for amendment in the registration is pending, there could not have been penalty proceedings otherwise.
Sri Aravind V Chavan, a learned Standing Counsel for the respondent who accepts notice for the respondent, is heard in the light of the afore with the learned standing counsel contending that the petitioner has been issued with the Show Cause Notice on 23.06.2025 but the petitioner has not responded to the same. The learned Standing Counsel also points out that this Court's order in the writ petition in W.P. No.3324/2026 is after the impugned Penalty Order and that the impugned order dated 23.12.2025 is not just a Penalty Order but tantamounts to an adjudication because of the HC-KAR NC: 2026:KHC:32574 Input Tax Credit [ITC] availed during the financial years 2018-19 to 2024-25. 3. This Court opines that the penalty proceedings cannot be sustained when the question of cancellation of registration and the question of amendment to the registration are pending consideration, and this Court must also observe that the adjudication, which is allegedly because of violation of the Section 16(2) of the Central Goods and Services Tax Act, 2017 [for short, ‘the CGST Act] is an ex parte order without the petitioner having shown cause. When the penalty proceedings cannot be sustained in the afore circumstances and the adjudication is ex parte, this Court is of the further opinion that there must be interference limited to the extent of treating the impugned Penalty Order dated 23.12.2025 as a Show Cause Notice against the alleged violation of Section 16(2) of the CGST Act with liberty to the petitioner to file a response within a HC-KAR NC: 2026:KHC:32574 definite timeline and calling upon the authorities to decide on the ITC claimed. In the light of the afore, the following. ORDER [A] The petition is allowed in-part and the impugned Penalty Order dated 23.12.2025 insofar as the penalty is quashed but without prejudice to the respondents to initiate proceedings subject to the decision in the pending proceedings in the light of the directions in W.P. No.3324/2026. [B] The impugned Penalty Order dated 23.12.2025 insofar as there are findings regarding liability on the ITC claimed is read as a Show Cause Notice with opportunity to the petitioner to file response against such finding. The HC-KAR NC: 2026:KHC:32574 petitioner will be at liberty to file such response by 24.08.2026. [C] The Authorities are called upon to consider the petitioner's reply to the allegations of wrongful claim of ITC for the years 2018-19 to 2024-25 in violation of Section 16(2) of the CGST Act.
[D] It is needless to observe that all contentions otherwise are left open. (B M SHYAM PRASAD) JUDGE
AN/-
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.