M/S 24 X 7 Total Water Solutions vs. Assistant Commissioner

Held

The Court allowed the petition in part. It quashed the Adjudication Order dated 13.08.2024, restoring the proceedings initiated by the Show Cause Notice dated 07.05.2024. The petitioner was granted an opportunity to file a response to the Show Cause Notice by 30.10.2026, without further notice. The Court reasoned that the petitioner's contention of being unaware of the proceedings due to notices being uploaded only on the portal was bonafide. It acknowledged that in similar circumstances, where the mismatch is due to supplier error, the registered taxable person should be allowed to produce documents to justify transactions, referencing Circular No. 193/05/2023. The petitioner was directed to deposit 10% of the tax proposed in the Show Cause Notice along with its response. The Court did not expressly leave any issue undecided.

Facts

The petitioner, M/s 24 X 7 Total Water Solutions, challenged an Adjudication Order dated 13.08.2024, passed by the Assistant Commissioner of Commercial Taxes under Section 73(9) of the Karnataka Goods and Services Tax Act, 2017. The order pertains to the financial year 2019-20 and concerns a demand for tax, interest, and penalty arising from an alleged mismatch between Form GSTR-2A and GSTR-3B. The petitioner claims it was unaware of the adjudication proceedings, only learning about them when its bank account was attached via a Recovery Notice dated 20.02.2026. The petitioner did not participate in the adjudication process.

Key Issues

1. Whether the Adjudication Order dated 13.08.2024, passed under Section 73(9) of the KGST Act, is liable to be quashed for violation of principles of natural justice, given the petitioner's claim of non-receipt of proper notice? Petitioner's arguments: The petitioner contends that the Adjudication Order is illegal and arbitrary as it was passed without proper notice and opportunity to be heard, violating principles of natural justice. It asserts that it can provide documents like purchase invoices, payment details, and e-way bills to establish the genuineness of transactions, which were disallowed solely based on a GSTR-2A and GSTR-3B mismatch, without independent verification or establishing ineligibility under Section 16 of the Act. The petitioner relies on the principle that if the mismatch is due to the supplier's failure to update data, it should be allowed to produce justifying documents, as per Circular No. 193/05/2023. Respondent's arguments: The respondent argues that the petitioner failed to respond to the audit observations in Form GST ASMT-10 dated 15.02.2024 and the Show Cause Notice dated 07.05.2024, both of which were uploaded on the portal. The respondent seeks to place on record printouts to prove the upload.