Facts of the Case

The petitioner, M/s Zeus India, represented by its proprietor Shri Syed Gulsheer, approached the Karnataka High Court under Articles 226 and 227 of the Constitution of India challenging the adjudication order reflected in Form GST DRC-07 dated 27.01.2023 and the Summary of Order.

The impugned proceedings related to Financial Year 2018-19, covering the tax period from April 2018 to March 2019.

The petitioner sought quashing of the impugned order passed by the Assistant Commissioner of Commercial Taxes, LGSTO-150, Bengaluru, and also sought a declaration that it was entitled to the entire ITC of ₹7,31,740, comprising:

  • IGST: ₹4,24,364
  • CGST: ₹1,53,688
  • SGST: ₹1,53,688

The petitioner also challenged demands for:

  • Interest: ₹4,31,225
  • Penalty: ₹73,174

The judgment records that the impugned order followed a Show Cause Notice in Form GST DRC-01 under Section 73(1) of the Karnataka Goods and Services Tax Act, 2017, but the petitioner had not filed any response to the notice. These details are reflected particularly on pages 2 and 3 of the judgment.

The petitioner approached the High Court against the order dated 27.01.2023 after more than three years. The petitioner’s case was that it had filed monthly returns for the relevant tax period before 05.03.2020 and, because the returns were filed before 30.11.2021, the impugned order could not be sustained in view of the statutory amendment and Notification dated 27.09.2024 relied upon by it.

Issues Involved

The principal issues before the Karnataka High Court were:

  1. Whether the Form GST DRC-07 adjudication order dated 27.01.2023 passed following proceedings under Section 73(1) of the KGST Act, 2017 could be sustained without reconsidering the petitioner’s ITC claim in light of returns filed before 30.11.2021.
  2. Whether the petitioner was entitled to consideration of its ITC claim for FY 2018-19 under the benefit associated with the statutory cut-off referred to under Section 16(5).
  3. Whether monthly returns filed before the relevant cut-off date required the authority to reopen and re-adjudicate the ITC claim.
  4. Whether the amendment and Notification dated 27.09.2024 relied upon by the petitioner affected the sustainability of the earlier adjudication order.
  5. Whether the petitioner’s delay of more than three years in approaching the High Court, including failure to approach immediately after the Notification dated 27.09.2024, should affect the grant of relief.
  6. Whether the Court should directly declare the petitioner entitled to the entire ITC of ₹7,31,740 or instead remit the matter for reconsideration by the competent authority.
  7. Whether the demands for interest of ₹4,31,225 and penalty of ₹73,174 could survive without fresh examination of the underlying ITC claim.

Petitioner’s Arguments

The petitioner contended that it had filed its monthly returns for the relevant tax period before 05.03.2020.

It argued that because those returns had been filed before 30.11.2021, the impugned adjudication order could not be sustained in view of:

  • the statutory amendment relied upon by the petitioner;
  • the Notification dated 27.09.2024; and
  • the legal position emerging from relevant judicial decisions concerning ITC claims where returns were filed within the prescribed cut-off.

Learned counsel for the petitioner, Shri Harish Vashist, sought intervention on the basis of these circumstances.

The petitioner’s essential case was that its ITC claim for FY 2018-19 required reconsideration because the relevant returns had already been filed within the cut-off period now material to the amended statutory framework. These arguments are recorded on page 4 of the judgment.

Respondent’s Arguments

The learned Additional Government Advocate appearing for the respondents did not dispute that the petitioner would be entitled to the benefit of consideration of returns filed before 30.11.2021, in view of certain decisions referred to during the proceedings, including W.P. No. 7217 of 2026 (T-RES).

However, the State raised a significant objection concerning delay. It submitted that the Court should consider that:

  • the petitioner had challenged the order dated 27.01.2023 only after more than three years; and
  • the petitioner had not approached the Court immediately after the Notification dated 27.09.2024.

Thus, while the State did not dispute the relevance of considering returns filed prior to 30.11.2021, it urged the Court to take into account the petitioner’s delayed approach. This stand is recorded on pages 4 and 5 of the judgment.

Court Order / Findings

The Karnataka High Court considered a copy of the order passed in W.P. No. 7217 of 2026.

The Court noted that, in that matter, the authorities had been directed to reconsider the ITC claim in light of observations made in W.P. No. 6883 of 2026 (T-RES), disposed of on 11.03.2026.

The principle reproduced in the present judgment was that where:

  • returns had been filed within the cut-off date stipulated under Section 16(5); and
  • the returns related to the period mentioned therein,

the petitioner would be entitled to have the ITC claim reconsidered, with the respondent authority required to re-look into and re-adjudicate the matter while keeping other contentions open.

Applying this approach, the Karnataka High Court:

  • allowed the petition in part;
  • quashed the adjudication order dated 27.01.2023; and
  • directed the competent authority to reconsider and examine whether the petitioner must be allowed to claim ITC in terms of the returns filed before 30.11.2021.

The decisive discussion appears on page 5, and the final operative direction is completed on page 6 of the judgment.

Important Clarification

This judgment does not finally declare that M/s Zeus India is unconditionally entitled to the entire ITC of ₹7,31,740.

The petitioner had expressly sought a declaration of entitlement to the full ITC amount, but the High Court did not grant that final substantive declaration. Instead, it:

  • allowed the petition in part;
  • quashed the adjudication order dated 27.01.2023; and
  • required the authority to reconsider and examine whether ITC should be allowed based on the returns filed before 30.11.2021.

Therefore, the operative relief is one of reconsideration and re-adjudication, not automatic final allowance of the entire ITC claim.

A second important clarification is that the petitioner had not filed a response to the original Form GST DRC-01 show cause notice under Section 73(1). The judgment expressly records this fact.

A third clarification concerns the statutory reference. The judgment text states that the petitioner relied upon an “amendment to Section 165 of the Act”, while the later passage reproduced by the Court expressly refers to the cut-off under “sub-clause (5) to Section 16.” For faithful reporting without changing the judgment’s meaning, both references should be recorded as they appear in the order; the operative ITC reconsideration reasoning is expressly connected with Section 16(5).

A fourth clarification is that although the petitioner challenged interest of ₹4,31,225 and penalty of ₹73,174 as illegal and without jurisdiction, the High Court’s operative order is framed as a partial allowance with reconsideration of the ITC claim. The judgment does not separately deliver a final merits determination declaring each component of interest and penalty permanently invalid.

Sections / Legal Provisions Involved

Section 73(1) of the Karnataka Goods and Services Tax Act, 2017:
The impugned adjudication followed a Show Cause Notice issued in Form GST DRC-01 under this provision. The petitioner did not file a response to that notice.

Section 16(5) – ITC Cut-Off Context:
The judgment reproduces the principle that returns filed within the cut-off date stipulated under sub-section/sub-clause (5) to Section 16, relating to the specified period, require reconsideration of the ITC claim.

Section 165 reference as appearing in the judgment:
The petitioner’s contention is recorded as relying upon an amendment to “Section 165 of the Act” and Notification dated 27.09.2024. This reference is reproduced faithfully because it appears in the judgment text.

Articles 226 and 227 of the Constitution of India:
The writ petition was filed invoking the constitutional jurisdiction of the Karnataka High Court.

Form GST DRC-01:
The show cause notice initiating the Section 73(1) proceedings.

Form GST DRC-07:
The impugned order/summary dated 27.01.2023 challenged by the petitioner.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783059165_359compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.