M/ Shah Associates vs. The Assistant Commissioner Of Commercial Taxes. - Karnataka High Court, 03 June 2026

Cause title — parties, addresses and appearances

- 1 - HC-KAR NC: 2026:KHC:26146 WP No. 14293 of 2026 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF JUNE, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 14293 OF 2026 (T-RES) BETWEEN: M/ SHAH ASSOCIATES REPRESENTED BY ITS PROPRIETOR MR. MOHAMMED SHABBIT AHAMED HAVING ITS PRINCIPAL PLACE OF BUSINESS AT NO.128/4, GROUND FLOOR, BUDHAL ROAD, NEAR TAJ PALACE, B N LAYOUT, DAVANAGERE, KARNATAKA, 577001. …PETITIONER (BY MS. VANDANA., ADVOCATE FOR SRI. GOWRI SHANKER M., ADVOCATE) AND: 1. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES., LGSTO-460, DEVARAJ URS LAYOUT, DAVANAGERE - 577006. 2. THE ADDITIONAL COMMISIONER COMMERCIAL TAX OFFICER (SAW) VANIJYA THERIGE KARYALAYA-2, Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:26146 WP No. 14293 of 2026 KORAMANGALA, BENGALURU 560047. 3. THE JOINT COMMISSIONER OF COMMERCIAL TAXES (ADMIN) DGSTO, DAVANGERE DIVISION, C.R. BUILDING 'C' BLOCK, DEVARAJ URS LAYOUT, DAVANAGERE - 577006. …RESPONDENTS (BY SRI.K. HEMA KUMAR., AGA) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO A) QUASH THE IMPUGNED ORDER NO. ACCT/460/ITC(B) (86)/DVG/2025-26 DATED 23-02-2026 AT ANNEXURE-A PASSED BY THE RESPONDENT NO. 1 AS BEING ILLEGAL, ARBITRARY, AND VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE AND THE FUNDAMENTAL RIGHTS OF THE PETITIONER; B) DIRECTION, COMMANDING THE RESPONDENTS TO FORTHWITH UNBLOCK THE INPUT TAX CREDIT AMOUNTING TO RS. 5,60,994/- (RS. 2,80,497/- CGST AND RS. 2,80,497/- KGST) IN THE ELECTRONIC CREDIT LEDGER OF THE PETITIONER (GSTIN. 29BWYPA8025L1ZT); C) ISSUE WRIT OF MANDAMUS OR ANY OTHER WRIT OR ORDER, DIRECTION REMANDING THE CASE OF THE PETITIONER TO THE FILE OF THE RESPONDENT NO.1 FOR FRESH ADJUDICATION AND RECONSIDERATION IN ACCORDANCE WITH LAW. - 3 - HC-KAR NC: 2026:KHC:26146 WP No. 14293 of 2026 THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

ORAL ORDER

The petitioner is aggrieved by the first respondent’s order dated 23.02.2026 [Annexure-A] under Rule 86 (A) of the Central Goods and Service Tax Act/Karnataka Goods and Service Tax Rules, 2017 [for short, ‘CGST/KGST Rules’] blocking the petitioner's electronic credit ledger. Ms. Vandana, the learned counsel for the petitioner, and Mr. K. Hema Kumar, the learned Additional Government Advocate for the respondents, are heard for disposal of the petition with the petitioner presenting a short ground for decision.

The first respondent's decision to block the petitioner's electronic credit ledger is because of availing of ITC based on alleged fraudulent invoices but this decision is taken without notice to the HC-KAR NC: 2026:KHC:26146 petitioner. It is undisputed that with a decision of a Division Bench of this Court in M/s. K-9 Enterprises vs. State of Karnataka and Another1 though it would be within the juri iction of the concerned to block ITC, given the consequences, such decision should be in accordance with the principles of natural justice extending an opportunity to show cause against such decision. In fact, a copy of the order dated 12.03.2026 in W.P.No.7734/2026 [T- RES] is placed on record which is based on such decision. In the light of the afore, the following:

ORDER

The petition is allowed-in-part, and the impugned order dated 23.02.2026 [Annexure-A] is quashed but with liberty to the first respondent to commence fresh proceedings for

1 (2025) 137 GSTR 450 HC-KAR NC: 2026:KHC:26146 blocking but after due notice and opportunity to the petitioner. (B M SHYAM PRASAD) JUDGE