M/S Ameena Traders vs. The State Of Karnataka
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The petitioner challenged an order in Form GST DRC-07 under Section 74 of the CGST/KGST Act, demanding tax, interest, and penalty for blocked Input Tax Credit (ITC) for FY 2019-20. The demand was based on transactions with an alleged non-existing entity issuing invoices without actual supply. The petitioner claimed non-receipt of intimation and show cause notices, which were only uploaded on the portal, and sought an opportunity to prove the genuineness of transactions.
Held
The Court partly allowed the petition, quashing the impugned order and restoring the proceedings to the Assistant Commissioner. It granted the petitioner an opportunity to file all necessary documents by a specified date, subject to depositing 10% of the demanded amount.
Key Issues
The key legal issues were the constitutional validity of Section 16(2)(C) of the CGST/SGST Act and whether the petitioner was denied a reasonable opportunity to respond to the demand for blocked Input Tax Credit.
Sections Cited
Section 16(2)(C), Section 74
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL ORDER The petitioner is aggrieved by the Order dated 03.03.2026 in Form GST DRC-07 [Annexure – D] under Section 74 of the Central Goods and Services Tax Act, 2017/Karnataka Goods and Services Tax Act, 2017 [for short, the 'CGST Act']/KGST Act']. The petitioner's Input Tax Credit [ITC] is blocked, and the petitioner is called upon to pay tax with interest and penalty for the tax period 2019 - 2020 on the ground that the petitioner's transaction is with a non-existing entity which is not conducting business from the place of registration and is issuing invoices without actual supply of goods.
The petitioner is issued with intimation in DRC-01A on 27.11.2023 and with a Show Cause Notice in Form DRC-01 on 28.12.2023. The petitioner has not responded to the intimation or the notice, and the second respondent has therefore concluded that the petitioner's transactions are with a non- HC-KAR NC: 2026:KHC:31050 existing firm and that the returns are filed based on invoices without the underlying supply.
Mr. K. M. Shivayogiswamy, the learned counsel for the petitioner, submits that both the intimation and the Show Cause Notice are only uploaded on the Portal and the petitioner is not served with these, and on merits of the petitioner's grievance, the learned counsel submits that the supplier's registration is cancelled with effect from 04.03.2021 and the petitioner's business with these entities is prior to this as could be seen from the other annexures enclosed to the petition. Crucially, the learned counsel submits that if the petitioner is extended an opportunity, the necessary documents would be filed to justify the genuineness of the transactions.
Mr. K. Hema Kumar, a learned Additional Government Advocate who is called upon to accept notice to the respondents, is heard. The question for HC-KAR NC: 2026:KHC:31050 consideration is whether this Court must interfere to extend another opportunity. The petitioner cannot contest that the intimation in Form GST DRC-01A and Show Cause Notice in Form GST DRC-01 were issued on 27.11.2023 and 28.12.2023 respectively but the petitioner has failed to respond and the explanation is that the petitioner is not served with the notices otherwise apart from uploading on the Portal. It is also possible that the intimation is delivered only on the registered E-mail. The petitioner seeks opportunity to produce documents to show the genuineness of the transaction for the period prior to the date of cancellation of the supplier's registration.
In the circumstances, this Court is of the view that there must be interference to extend another opportunity to the petitioner to show cause but on terms which must include deposit of a reasonable amount subject to outcome and the HC-KAR NC: 2026:KHC:31050 timeline within which the documents must be filed. In the light of the afore, the following. ORDER
[a] The petition is allowed in-part.
[b] The impugned order dated 03.03.2026 is quashed restoring the proceedings to the second respondent with liberty to the petitioner to file all documents without further notice by 20.07.2026. [c] The petitioner shall also deposit by this date 10% of the amount in demand subject to the final orders in the restored proceedings including orders on set off if the petitioner succeeds and shows cause against the proceedings under Section 74 of the CGST/KGST Act.
RB (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.