Bharath Chemical Industries vs. The State Of Karnataka

Held

The Court held that the grievance of the petitioner regarding the endorsement rejecting its request to change the authorized signatory for GST returns would necessarily have to be decided by the Arbitral Tribunal during the arbitration proceedings. However, acknowledging the undisputed fact that respondent No. 3 had been filing GST returns until July 2022 and the GSTIN and user ID stood in his name, the Court, for the limited purpose of enabling the returns to be filed on behalf of the petitioner-firm, directed respondent No. 3 to file the GST returns. This was without prejudice to the rights and contentions of both parties before the Court, GST authorities, and in the arbitration proceedings. The Court also directed that filing of GST returns and generating e-way bills by respondent No. 3 would not create any right or interest in his favour affecting the rights of the other partners. The dispute between the partners was formally referred to arbitration to Sri V.V. Angadi, retired District Judge, at the Arbitration and Conciliation Centre, Bengaluru.

Facts

The petitioner, Bharath Chemical Industries, a partnership firm, sought to quash an endorsement dated 10.08.2022 issued by the Assistant Commissioner of Commercial Taxes. This endorsement rejected the firm's request to change the authorized signatory/e-mail and mobile number for filing GST returns and making payments. The reason for rejection was that respondent No. 3, K. Jayaprakash, a partner, had been filing returns until July 2022 and had made irregular payments. The dispute between the partners, including respondent No. 3, had been referred to arbitration by an order dated 05.04.2022 in O.S. No. 518/2021, which had attained finality. The parties jointly submitted that they had not agreed on an arbitrator but proposed retired District Judge Sri V.V. Angadi.

Key Issues

1. Whether the endorsement dated 10.08.2022 issued by the Assistant Commissioner of Commercial Taxes, rejecting the petitioner's request to change the authorized signatory for GST returns, is arbitrary and illegal? The petitioner argued that the endorsement was unsustainable as the inter se dispute between partners was referred to arbitration, and the GST authorities should not have intervened in this internal matter. The revenue (respondents 1 and 2) contended that respondent No. 3 was the authorized signatory and had been filing returns, and the issue of irregular payments needed to be addressed. 2. Whether the dispute regarding the filing of GST returns and changing the authorized signatory should be decided by the Arbitral Tribunal? Both the petitioner and respondent No. 3 jointly submitted that the matter could be referred to arbitration. The Court had to decide how to address the immediate need for filing GST returns while the arbitration was pending.