M/S K Ramakrishna Reddy vs. The Commerical Taxes Officer

OTHERS, [2024] 167 Taxmann.com 73 has held that ex parte orders are unsustainable in law, and has remitted the matter back to the hands of the concerned authority, to hear the matter afresh after hearing the petitioners therein. HC-KAR NC: 2025:KHC:31516

Following the said judgment of the Apex Court in SAFARI RETREATS supra, a Coordinate Bench of this Court in identical circumstance has held as follows. "The petitioner, who is engaged in the business of letting out commercial properties for rent and on lease, has filed this petition calling in question the first respondent's Order-of-Adjudication dated 28.02.2025 [Annexure-A]. The first respondent's order dated 28.02.2025 is under Section 73(9) read with certain other provisions of the Karnataka Goods and Services Tax Act, 2017/the Central Goods and Services Tax Act, 2017 [for short, 'the GST Act'] read with relevant Rules and for the tax period between 01.04.2020 and 31.03.2021. The petitioner has also called in question the summary of the Order of Adjudication dated 28.02.2025 [Annexure-A1] while seeking a declaration of entitlement to the benefit of Input Tax Credit [ITC] for a certain value.

The petitioner has impugned the aforesaid orders on the grounds such as that [a] the first respondent has started, conducted and completed the audit proceedings under Section 65 of the GST Act and having thus completed audit proceedings, the first respondent has also assumed juri iction to adjudicate under Section 73 of the GST Act, [b] this should be impermissible because adjudication will entail an examination of the merits of the audit observation, [c] Retreats Private Limited and others [2024] 167 Taxmann.com 73 has opined that the expression ‘the plant or machinery’ as found in Section 17(5)(d) of the GST Act, cannot be given the same meaning as the expression ‘the plant and machinery’ as defined by the Explanation to Section 17, and [d] whether a building can be classified as a 'plant' within the meaning of the expression 'the plant or machinery' as used in Section 17(5)(d) of the GST Act is a factual question which is to be determined keeping in mind the business of the HC-KAR NC: 2025:KHC:31516 registered person and the role that the building plays in the said business.

Sri Sandeep Huilgol, the learned counsel for the petitioner, while emphasizing the afore grounds and asserting that the first respondent has failed to consider these aspects in concluding the Order of adjudication resulting in demand, places reliance upon the orders of this Court in W.P. No.4835/2025 [This petition is decided on 05.03.2025] to contend that proceedings are restored for re-consideration in very similar circumstances where the Order of adjudication was concluded without actually examining whether a building can be called ’a plant'’ as is mentioned under within the meaning of ‘a plant' as is contemplated under Section 17(5)(d) of the GST Act. The first respondent has not considered this question at all and therefore, there must be limited interference restoring the proceedings to the first respondent with opportunity to the petitioner to file a fresh reply directing the first respondent to reconsider all grounds including the grounds on its juri iction to conduct the adjudicatory proceedings HC-KAR NC: 2025:KHC:31516 under Section 73 of the GST Act after completing the audit proceedings.

At this stage, Sri Sandeep Huilgol submits that the petitioner has already deposited 10% of the amount in demand consequent to the impugned Order-of- adjudication and that this amount may be directed to be held by the respondents subject to the conclusion of the restored proceedings. This Court opines that just observations must also be made to ensure that there is complete adjudication. In the light of the afore, the following: ORDER [A] The petition is allowed in part and the impugned Order-of-adjudication dated 28.02.2025 in No. CTO (AUDIT 1.2)/(ADJ)- 1931/2024-25 passed by the first respondent and the summary of the Orders dated 28.02.2025 [Annexures - A and A1] are quashed restoring the Limited and others [supra] and also other grounds. [B] The petitioner shall appear before the first respondent without further notice on 07.07.2025 and shall be at liberty to file additional replies/responses/documents and the first respondent is called upon to consider the earlier reply as also the additional reply and documents filed in terms of the liberty reserved by this Court."

In the light of the undisputed fact that the issue being similar, the petition deserves to succeed albeit in part, as HC-KAR NC: 2025:KHC:31516 is observed by the Coordinate Bench in the judgment quoted supra. The petitioner is also entitled to the same: ORDER [A] The petition is allowed in part and the impugned Order-of-adjudication dated 04.02.2025 in No.CTO Audit- 4.10/DRC-07/2024-25 passed by the respondent vide Annexure-D stands are quashed restoring the proceedings to [supra] and also other grounds. [B] The petitioner shall appear before the respondent without further notice on 01.09.2025 at 2.30 p.m. and shall be at liberty to file additional replies/responses/documents and the first respondent is called upon to consider the earlier reply as also the additional reply and documents filed in terms of the liberty reserved by this Court. In the event, the petitioner would not avail the opportunity as granted by this Court in terms of the aforesaid HC-KAR NC: 2025:KHC:31516 order, the authority is at liberty to pass necessary orders in accordance with law and the petitioner will be precluded from projecting that the order is passed in violation of principles of natural justice.