M/S. Star Steel Exchange vs. The Assistant Commissioner Of Commercial Tax

WP/18038/2026HC KarnatakaGSTCNR KAHC01039927202624 June 2026Bench: B M SHYAM PRASAD8 pages

For Petitioner: SRI. PRANAY SHARMA Y., ADVOCATEFor Respondent: SRI. K. HEMA KUMAR, AGA

AI SummaryPartly Allowed

Facts

The petitioner challenged an adjudication order, show cause notice, and intimation issued under Section 73 of the CGST/KGST Act for FY 2021-22. The petitioner contended that the audit proceedings were belated, the adjudication officer was also the audit officer, and there was a human error in entering surplus sums under the Reverse Charge Mechanism, which they could demonstrate with documents.

Held

The High Court quashed the adjudication order, allowing the petition in part. It restored the proceedings to the stage of personal hearing, granting the petitioner an opportunity to file a further reply and produce documents, subject to depositing 10% of the demanded amount.

Key Issues

Whether the adjudication order was valid given alleged belated audit proceedings and the adjudicating officer's role as audit officer, and if the petitioner should be granted an opportunity to present evidence regarding errors in Reverse Charge Mechanism entries and trade payables.

Sections Cited

Section 73, Section 65

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

- 1 - HC-KAR NC: 2026:KHC:31453 WP No. 18038 of 2026 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF JUNE 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 18038 OF 2026 (T-RES) BETWEEN: M/S. STAR STEEL EXCHANGE REPRESENTED BY ITS PROPRIETOR SHRI. SYED IBRAHIM KHALEELULLA SON OF SHRI. SYED MUSTAN AGED ABOUT 42 YEARS HAVING OFFICE AT DARGAJOGAHALLI MAIN ROAD NO.394, ISLAMPURA, DODDABALLAPURA BENGALURU RURAL, KARNATAKA 561203 GSTIN- 29CKSPS8288J1ZR …PETITIONER (BY SRI. PRANAY SHARMA Y., ADVOCATE) AND: 1. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX OFFICER (AUDIT-5.2) VANIJYA TERIGE BHAVAN DGSTO-5, RAJENDRANAGAR KORAMANGALA Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:31453 WP No. 18038 of 2026 BENGALURU - 560047 2. THE JOINT COMMISSIONER OF COMMERCIAL TAX VANIJYA TERIGE BHAVAN DGSTO-5, RAJENDRANAGAR KORAMANGALA BENGALURU - 560047 3. THE COMMERCIAL TAX OFFICER THE LOCAL GOODS AND SERVICE TAX 153 ANANDARAM BUILDING, OPP CIVIL COURT, RAJIPURA, DODDABALLAPURA, KARNATAKA - 561203. 4. THE MANAGER HDFC BANK VT ARCADE WARD NO.5 SOUNDARYAMAHA CINEMA NEAR OLD BUS STAND, SHENIGARAPETE DODDABALLAPURA - 561203 …RESPONDENTS (BY SRI. K. HEMA KUMAR, AGA) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 17.12.2025 PASSED UNDER SECTION 73(9) OF THE CGST ACT AND CORRESPONDING PROVISIONS OF THE KGST ACT FOR THE TAX PERIOD FINANCIAL YEAR 2021-22 BY THE BY THE RESPONDENT NO.1 BEARING NO. ACCT(A)5.2/CASE ID AD290925053980J/2025-26. COPY OF THE ORDER DATED 17.12.2025 PASSED UNDER SECTION 73(9) OF THE CGST ACT, 2017 IS ENCLOSED AND MARKED AS ANNEXURE - A1; - 3 - HC-KAR NC: 2026:KHC:31453 WP No. 18038 of 2026 ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF A WRIT OF CERTIORARI QUASHING CHALLENGING THE NOTICE DATED 17.12.2025 ISSUED IN DRC-07 FOR THE TAX PERIOD FINANCIAL YEAR 2021-22 BY THE RESPONDENT NO.1 BEARING REFERENCE NO ZD2912251343105. COPY OF THE DRC-07 NOTICE DATED 17.12.2025 IS ENCLOSED AND MARKED AS ANNEXURE- A2; ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF A WRIT OF CERTIORARI QUASHING THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 73(1) OF THE ACT DATED 23.09.2025 FOR THE TAX PERIOD 2021-22 BY THE RESPONDENT NO.1 BEARING NO AD290925053980). COPY OF THE SHOW CAUSE NOTICE DATED 23.09.2025 IS ENCLOSED AND MARKED AS ANNEXURE -A3; ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF A WRIT OF CERTIORARI QUASHING THE SUMMARY OF THE SHOW CAUSE NOTICE DATED 23.09.2025 IN FORM GST DRC-01 BY THE RESPONDENT NO. 1 VIDE REFERENCE NO. ZD290925150793T. COPY OF THE FORM GST DRC-01 DATED 23.09.2025 IS ENCLOSED AND MARKED AS ANNEXURE A4.E) ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF A WRIT OF CERTIORARI QUASHING THE INTIMATION ISSUED UNDER FORM GST DRC-01A DATED 20.09.2025 BY THE RESPONDENT NO.1. COPY OF THE INTIMATION ISSUED UNDER SECTION 73 OF THE ACT DATED 20.09.2025 IS ENCLOSED AND MARKED AS ANNEXURE - A5. THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: - 4 - HC-KAR NC: 2026:KHC:31453 WP No. 18038 of 2026 CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

ORAL ORDER

The petitioner has called in question the Adjudication Order dated 17.12.2025 under Section 73 of the Karnataka Goods and Services Tax Act, 2017 [for short, ‘the KGST Act'] and the Central Goods and Services Tax Act, 2017 [for short, ‘the 'CGST Act']. The Adjudication Order is produced as Annexure - A1. The petitioner, apart from challenging the said Adjudication Order, has also called in question the Show Cause Notice and the Summary. These Show Cause Notice and Summary are produced as Annexures A3 & A4. 2. Mr. Y. Pranay Sharma, the learned counsel for the petitioner, submits that this Court must interfere with the very initiation of the proceedings quashing the intimation dated 20.09.2025 in Form GST DRC-01A [Annexure - A5] because the entire proceedings are based on audit HC-KAR NC: 2026:KHC:31453 proceedings which are begun belatedly despite specific timelines under Section 65(3) of the KGST Act and that the first respondent could not have completed the adjudication proceedings because the first respondent was also the Audit Officer. On the petitioner's participation in the proceedings, Mr. Y. Pranay Sharma submits as follows.

[a] The petitioner's Auditor has appeared when extended with an opportunity of personal hearing, but he has not filed necessary documents to demonstrate that the petitioner had erroneously entered surplus sums under the Reverse Charge Mechanism and that this was a genuine human error, and [b] The petitioner would not be liable to answer a claim on the trade payables. HC-KAR NC: 2026:KHC:31453

However, the learned counsel is categorical in stating that the petitioner will have to pay a fee for the delay in filing the Returns as observed in the impugned Adjudication Order. Mr. K. Hema Kumar, the learned Additional Government Advocate, is heard in the light of these circumstances, and the learned Additional Government Advocate points out that the petitioner has invoked this Court's juri iction without availing the appellate remedy and that the Appellate Authority could have considered all circumstances if the petitioner had availed this remedy.

The petitioner proposes to urge that the proceedings are vitiated on the grounds of limitation and on merit otherwise, but crucially the petitioner contends that the reason for the difference in the Input Tax Credit claimed under Reverse Charge Mechanism is because of a human error in entering the details and that it can demonstrate that it has HC-KAR NC: 2026:KHC:31453 discharged payments towards trade payables within one to two days but could not produce the documents. These circumstances must be reconsidered with due opportunity. Therefore, this Court opines that there must be interference to restore the proceedings to the stage of personal hearing with an opportunity to file an additional reply and produce documents leaving open all questions with the petitioner being put on terms. In the light of the afore, the following. ORDER

[a] The petition is allowed in part.

[b] The Adjudication Order dated 17.12.2025 [Annexure - A1] is quashed.

[c] The petitioner shall appear before the first respondent without further notice on 27.07.2026 and shall be at liberty to file a further reply and produce documents.

[d] The petitioner shall also deposit 10% of the amount in demand by 27.07.2026 HC-KAR NC: 2026:KHC:31453 subject to the outcome. Failure of which shall be a default to the petitioner’s prejudice. (B M SHYAM PRASAD) JUDGE

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.