Judgment
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE TWENTY FIRST DAY OF JULY TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE THE CHIEF JUSTICE SRI APARESH KUMAR SINGH AND THE HONOURABLE SRI JUSTICE G.M. MOHIUDDIN WRIT PETITION NO:15'l s6 0F 2026 [ 348e ] ...PETITIONER Between:
Y1: Bl :y":' ,lndustries,.Repres€nted by its proprietor Basanthtat Sah, S/o Shri Irjay Lar sah, aged about 4g years, at Survey No. 63/44,64/LUU, Chinna Shivanoor, Chegunta, Chinna Shivinoor, Medak, Tjangana, 502255.
AND l The state of rerangana, Represented by its principar Secretary, commerciar Taxes, Secretariat, Hyderabad 2' The commissioner of the comm_erciar raxes Department, Terangana state, c.T Complex, Nampally, Hyderabad-500 00.1 .
3. The State Tax Officer-1 , Hyderabad Rural Division, 6th Floor, Gaganvihar Building, Opp. Gandhi Bhavan, Nampally, Hyderabad_50000.1.
4. The Additionar/Joint commissioner of ientiar rax (Anti Evasion), Medchar GST Bhavan, 1 1 -4-64gtB, Lak-di_ka_poot, Hyderabad-50d004.
...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in lhe affidavit fired therewith, the High court may be preased to issue a direction or orders, more particularly in the nature of a writ of Mandamus or any other appropriate writ, decraring the impugned rectification rejection order vide Reference No 2D3611250637377 dared 2a-11-2025 arong with its attachment and GST DRC-07 vide Reference No. 2D3605250'139871 dared 12-05-2025 arong with the attachmenr and DRC-0'1 Ref No. 2D361124041712R dated 2g-11-2024 that are
contrary to the law in violation of section 6(2) of the cGST Act, 2017. as void ab-initio, illegal. arbitrary, violation of principles of natural justice, and violation of Article t g (1) (g) and 3004 of the Petitioner.
l.A. NO: 1 OF 2026 Petltion under Section '1 51 cPC praying that in the circumstances stated in the affidavit filed in suppon cf the petition, the High coufi may be pleased to grant stay by restrain ng the Respondents from initiating any action to recover the demands confirmed under the impugned order vide DRC-07 Reference No. 2D3605250139871 daled 12-05-2025, pending disposal of this writ petition.
Counsel for the Petitioner: SRI S.V.PRANAV RAM Counsel for the Respondent Nos.1 TO 3: SRI K.SAI AKARSH, AGP FOR STATE TAX counsel for the Respondent No.4: SRI DOMINIC FERNANDES' SENIOR STANDING COUNSEL FOR CBIC The Court made the following: ORDER
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD The Hon'ble The Chief Justice Sri Aparesh Kumar Sineh and The Hon'ble Sri Justice G.M.Mohiuddin Writ Petition No.15156 of 2026 Dated: 21.07.2026 Between:
IWs. Bhavani Industries, Rep. by its Proprietor Basanthlal Sah, Chegunta, Chinna Shivanoor, Medak, Telangana.
... Petitioner AND The State ofTelangana, Represented by its Principal Secretary, Commercial Taxes, Secretariat, Hyderabad and 3 others .. Respondents ORDER:
Heard Mr. S.V. Pranav Ram, learned counsel for the petitioner appearing in virtual mode; Mr. K. Sai Akarsh, leamed Assistant Govemment Pleader for State -fax, appearing for respondent Nos.l to 3 and Mr. Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (CBIC), appearing for respondent No.4.
., 2.
Petitioner-firm, registered with GSTIN No.
DRC-01 dated 29.11.2024, on two charges i.e., 36BEFPS6699M1ZE. under the Telangana State Tax Department has been proceeded against under Section 74 of the State Goods and Services Tax (SGST) Act, 2017lCentra1 Goods and Services Tax (CGST) Act,20l'7, vide summary of show-cause notice in Form GST (i) discrepancy in GS'[R-3B of the petitioner and GSTR-I of the supplier and (ii) During the audit, on comparison of GSTR-1 and GSTR-3B, the petitioner was found to have underreported the tax liability at Rs.5,11,346i- as against Rs.6,58,326l- comprising of Integrated Goods and Sen.ices Tax (IGST), CGST and SGST. As per the Assessment Order dated 12.05.2025 for the financial year 2020-21, both the charges were adjudicated, without any reply or submission of documents by the petitioner, confiming the demand of Rs.1,90,14,794l- towards IGST/CGST/SGST, on disaliowance of the irregularly availed lnput Tax Credit (ITC). For underreporting of the tax liability by, the petitioner, turn over tax to the tune of Rs.6,58,326i- was also imposed on all the three heads. Penalty equivalent to 509'o of the tax amount on the amount conhrmed was
3 imposed under Section 14(9) of the CGST Act with applicable interest as per Section 50 of the CGST Act' 3. The petitioner has assailed the Assessment Order dated 12.05.2025 on the ground that for the tax period 2017-18 to 2020.21, the CGST authorities have also undertaken adjudication proceedings on the basis of summary of show-cause notice in Form GSTDRC-OIdated2g.o.T.2O22onthechargesthatthepetitioner availed ITC without receipt ofgoods and against fake invoices issued by the non-existent f,rrms in violation of Section 16(2)(b) and 16(2)(c) of the CGST Act. By Order-in-Original dated 03'02'2025, the demand of Rs.3,1 1,42,4701- covering IGST/CGST/SGST was confirmed along with interest at applicable rates on the demand of Rs.3,11,42,470/- under Section 50(3) of the CGST Act read with Rule 88B of the CGST Rules read with Section 20 of the IGST Act and similar provisions of the SGST Act, with an equivalent amount of penalty under Section 74(9) of the CGST Act read with Section 20 of the IGST Act and similar provisions of the SGST Act.
The petitioner has prefened an appeal against the said Order-in- Original, which has been dismissed.
1 4.
l,eamed counsel 1br the petitioner submits that the petitioner is in the process o1'filing an appeal before the Goods and Services Tax Appellate Tribunal (GS IAT) 5.
In these background facts, petitioner has taken a plea that the adjudication proceedings conducted by the SGST authorities for the financial year 2020-2021 not only overlap the CGST proceedings for the financial years 2017-18 to 2020-21 in respect of certain period, but also overlap the charge against the petitioner of having irregularly availed ITC on cornparison of irs GSTR-3B with that of GSTR-l of the supplier. -fhe difference in demand on disallowance of ITC in both the adjudication proceedings is for the reason that the CGST proceedings covered a larger period. The CGST proceedings were based on investrgation.
6.
lt is also e" ident that the SGS t proceedings were also based on another charge of underreporting of tax liability by the petitioner, as found during the audit 7.
Both the learned counsel for the petitioner and learned counsel appearing fbr the CGS l- and the SGST authorities rely upon a
decision of the Apex Court in NVs. Armour Security (India) Ltd. v.
Commissioner, CGST, Delhi East Commissionerate and anotherr (paras 96 and97).
8.
On the part of the petitioner, it is submitted that the adjudication proceedings initiated by the SGST authorities after issuance of show cause notice by the CGST authorities was not permissible in view of Section 6(2)(b) of the CGST Act. The issue in both the proceedings and the periods having overlapped, the Assessment Order dated 12.05.2025, passed by the SGST authorities, be set aside.
9.
Both the learned counsel for CGST and SGST have tried to draw a distinction between the aforesaid two proceedings.
10. Learned Senior Standing Counsel for CGST has pointed out that while the Assessment Order dated 12.05.2025 was of different demand and covered other charge of undeneporting of tax liability by the petitioner, based on the audit report, the CGST proceedings were initiated on the basis of the investigation, which revealed irregular availment of ITC by the petitioner without receipt of goods and ' (2025) 777 taxmann.com 478 (SC)
6 against fake invoices issued by the non-existent firms, r'vhich is in contravention of Section 16(2)(b) and 16(2)(c) of the CGST Act' However. in substance, the demand relating to irregular availment of ITC r,vas for the same reason i. e., discrepancy between GSTR- 1 of the supplier and (}STR-3B of the petitioner. It also appears that the second charge in the SGST proceedings was forundeneporting ofthe tax liabilitl by the petitioner based on audit report' From perusal of the Assessment Order dated 12.05.2025, it is evident that the petitioner has neither fumished documents nor sought time to file replr to thc shou -cause notice.
1 1. Learned counsel lor the petitioner, by referring to paragraph 15 of the wnt afhdavit, contends that the petitioner had hled reply on 18.01.2025 and had also brought to the notice ofrespondent No'3 at the time o1- personal hearing to the show-cause notice contained in DRC-01, the lact of commencement of parallel proceedings' Though thepetitionerhaclfumishedthedetailsinitsrectificationapplication filed on 01.08.2025. r.vhich was acknowledged by respondent No 3' but no finding has been recorded with regard to the same in the order dated 20.1 1 2025. rejecting the rectification application.
7 12. lt therefore appears that as per the twofold test laid down by the Apex Court in lWs. Armour Security (India) Ltd. (supra) (para 96(x)), the charges for disallowance of ITC in both the proceedings appear to be for irregular availment ofITC on account of discrepancy between GSTR-I of the supplier and GSTR-3B of the petitioner. The demand appears to be different on account of the larger tax period covered under the CGST proceedings.
13. In such circumstances, ifthe SGST authorities have proceeded on the charge of disallowance of ITC on account of irregular or illegal availment of ITC for certain period overlapping the period covered under the CGST proceedings, in the fitness of things, the matter deserves to be remanded 14. Accordingly, the Assessment Order dated 72.05.2025 is set aside and the matter is remanded to the SGST authorities to pass a fresh order, after giving an opportunity to the petitioner and on consideration ofits reply and documents, ifany, furnished by it' 15. Needless to say, if the SGST authorities are satisfied that the disallowance of ITC is on the same issue as that of the proceedings
8 initiated by the C'GS1' authorities, it would be open for the SGST authorities to drop the said charge. lf the other charge relating to underreporting of tax liability by the petitioner based on the audit repon is f ound to be sustainable, the Proper Officer u.ould proceed to adjudicate the sarne as per law 16. Since the rnatter is being remanded, the observations, if any, made in this older would not influence the Proper Officer from taking a decision stnctl\ on merits in accordance with law 1'7. -fhe Writ l)etition is accordingly disposed of. There shall be no order as b costs.
Miscellaneous applications pending, if any, shall stand closed.
SD/. AHMED ABDULLAH KHAN ISTANT REGISTRAR //TRUE COPY// ECTION OFFICER The Princrpal Secretary. Commercial Taxes. Secretariat, Hyderabad, State of Telangana.
The Commrssicner oI the Commercial Taxes Deparlmerrt' Telangana State, C T Complex. Nampally. Hyderabad-500 001.
The State Tar Officer-1, Hyderabad Rural Division. 6th Floor, Gaganvihar Building. Opp. Gandhi Bhavan, Nampally, Hyderabad'500001 The Additjonal/Jornt Commissroner of Central Tax (Anti Evasion), lVedchal GST Bhavan 1 1 -4-61918. Lak-di-ka-pool, Hyderabad-500004.
One CC to SRI S V PRANAV RAM, Advocate IOPUC] One CC to SRI DOMINIC FERNANDES. SENIOR STANDING COUNSEL FOR cBrc [oPUC] Two CD Copies To 2 3 4 5 6 7 PSK.
TKS
HIGH COURT DATED: 2110712026 ORDER WP.No.15156 of 2026 DISPOSING OF THE WRIT PETITION WITHOUT COSTS.
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