Sri Kallanayakanahalli Nanjundappa Manjunath vs. State Of Karnataka

Held

The Court allowed the petition in part and quashed the Adjudication Order dated 31.01.2025. The proceedings were restored to the stage of the petitioner filing a reply to the Show Cause Notice dated 28.11.2024. The Court reasoned that if the petitioner could demonstrate that its supplies were indeed exempted, it would prevent protracted litigation. The petitioner was directed to file its reply and supporting documents on 06.11.2026 and deposit 10% of the tax covered under the Adjudication Order by that date, subject to the outcome of the restored proceedings. The second respondent was directed to consider the petitioner's reply and documents and decide with cogent reasons whether to affirm the proposition in the Show Cause Notice. The Court did not decide on the liability for interest or penalty, as the matter was remitted for reconsideration.

Facts

The petitioner, M/s. Maruthi Enterprises, represented by Sri Kallanayakanahalli Nanjundappa Manjunath, challenged an Adjudication Order dated 31.01.2025 issued by the Assistant Commissioner of Commercial Taxes (Audit)-2. The order, passed under Section 73(9) of the KGST/CGST Act, imposed tax, interest, and penalty. The petitioner argued that its supply of manpower services to educational institutions was exempt from GST under Notification No. 12/2017 dated 28.06.2017. The petitioner claimed it did not respond to the show cause notice because its Chartered Accountant failed to inform it of the proceedings. The Adjudicating Officer noted the petitioner's failure to file any response despite communications.

Key Issues

1. Whether the Adjudication Order dated 31.01.2025, issued by the Assistant Commissioner of Commercial Taxes (Audit)-2, is violative of Articles 14, 19, and 300A of the Constitution, being unreasonable, arbitrary, oppressive, excessive, and premeditated? 2. Whether the petitioner is liable to pay interest under Section 50 of the CGST Act for the period 2020-21? 3. Whether the petitioner is liable to pay penalty under Section 122(2)(a) of the CGST and SGST Acts? Petitioner's Arguments: The petitioner contended that its supply of manpower services, including First Division Assistants, Teachers, Security Guards, Attendants, Cooks, Assistants, and Cleaners to M/s. Morarji Desai Residential School, Ramanagar, was exempt from GST under Notification No. 12/2017 dated 28.06.2017. The petitioner further argued that it could not produce supporting invoices because its Chartered Accountant did not inform it about the ongoing proceedings, leading to its unawareness of the initiated actions. Revenue's Arguments: The judgment records that the learned Additional Government Advocate accepted notice for the respondents. No specific arguments from the revenue's side are recorded in the judgment regarding the merits of the petitioner's claims or the validity of the adjudication order.