Facts of the Case

The petitioner, M/s Jai Shakti Engineering and Construction, a partnership firm, challenged an adjudication order passed for the tax period 2018-19 under Section 73(9) read with Section 50 of the Karnataka Goods and Services Tax Act, 2017, the relevant Rules, and the corresponding provisions of the Central Goods and Services Tax Act, 2017.

The petitioner invoked the writ jurisdiction of the Karnataka High Court primarily on the ground that it had not been afforded a reasonable and effective opportunity to respond to the proceedings. The petitioner also sought quashing of the consequential recovery notice in Form GST DRC-13 dated 5 March 2026 issued to its banker.

The dispute arose from the sequence of communications and notices preceding adjudication. According to the petitioner, the first respondent sent an email on 25 January 2024 indicating that there were errors in Form GST DRC-01A and that a fresh notice would be issued. However, no fresh or corrected DRC-01A was subsequently issued. Instead, a show cause notice in Form GST DRC-01 was issued on 31 January 2024. The physical notice sent by Registered Post with Acknowledgment Due to the registered address was returned unserved with the remark that there was “no such person at the address.”

Thereafter, the adjudication order dated 18 April 2024 was passed. The petitioner challenged the order alleging lack of reasonable opportunity and sought restoration of the proceedings for fresh consideration.

Issues Involved

  1. Whether the adjudication order under Section 73(9) read with Section 50 could be sustained when the petitioner had been informed that a fresh notice would be issued due to errors in DRC-01A, but no fresh or corrected DRC-01A was subsequently issued.
  2. Whether availability of the DRC-01 show cause notice on the common GST Portal and service on the registered email ID was sufficient in the facts of the case, despite the physical notice having been returned unserved.
  3. Whether the petitioner’s explanation that it expected a fresh DRC-01A and therefore its consultant did not pay attention to the GST Portal or registered email merited acceptance.
  4. Whether the circumstances disclosed a lack of reasonable opportunity warranting interference by the High Court in exercise of jurisdiction under Articles 226 and 227 of the Constitution of India.
  5. Whether the adjudication proceedings should be restored for reconsideration by permitting the petitioner to submit its response to the DRC-01 notice dated 31 January 2024.

Petitioner’s Arguments

The petitioner contended that there was a clear lack of reasonable opportunity in the adjudication process. It relied upon the following circumstances:

  • The first respondent sent an email dated 25 January 2024 acknowledging errors in DRC-01A and indicating that a fresh notice would be issued.
  • Despite such communication, no fresh DRC-01A was issued.
  • A DRC-01 show cause notice was issued shortly thereafter on 31 January 2024.
  • The physical copy sent through RPAD to the registered address was returned unserved.
  • Since the petitioner had been specifically informed that a fresh notice would be issued, it legitimately expected a fresh DRC-01A.
  • Consequently, its consultant did not pay attention to the common GST Portal or registered email communication.
  • The adjudication order was therefore passed without an adequate and effective opportunity to file a detailed response and supporting evidence for FY 2018-19.

On this basis, the petitioner sought quashing of the adjudication order and restoration of the matter for fresh consideration from the appropriate stage.

Respondent’s Arguments

The learned High Court Government Pleader appearing for the first respondent opposed interference and submitted that:

  • DRC-01A had already been issued.
  • Issuance of a corrected DRC-01A was not a legal requirement.
  • The petitioner could not dispute that the show cause notice had been made available on the common GST Portal.
  • The show cause notice had also been served on the petitioner’s registered email ID.
  • Therefore, the Court should not interfere merely because a fresh or corrected DRC-01A had not been issued or because the physical notice was returned unserved.

The respondent thus maintained that the electronic availability and service of the show cause notice were sufficient to sustain the proceedings.

Court Order / Findings

The Karnataka High Court found that there could be no dispute that the petitioner was informed on 25 January 2024 that “a fresh notice” would be issued. Within approximately one week, a show cause notice in DRC-01 was issued, but the petitioner was not informed about correction of the error in the earlier DRC-01A or otherwise placed on clear notice regarding the changed course.

The Court also noted that the physical copy of the notice had been returned unserved.

In these circumstances, the Court accepted the petitioner’s case that it expected a fresh DRC-01A and that, for this reason, its consultant did not pay attention to the GST Portal or email communication. The Court held that there was a lack of opportunity and that, for complete adjudication, the petitioner must be afforded a reasonable opportunity to file a response.

Accordingly, the writ petition was allowed in part, and the Court ordered:

  • The adjudication order dated 18 April 2024 was quashed.
  • The proceedings were restored for reconsideration.
  • The petitioner was granted liberty to file its response, if any, to the DRC-01 notice dated 31 January 2024 both online and by physical copy.
  • Such response was required to be filed within one month from 2 June 2026, without awaiting a certified copy of the High Court’s order.
  • The petitioner was expressly barred from raising grounds of limitation.
  • All other questions were kept open for consideration.

Important Clarification

This judgment does not lay down that a corrected DRC-01A must invariably be issued in every GST proceeding whenever an earlier DRC-01A contains an error. The respondent specifically argued that a corrected DRC-01A was not legally required, and the Court’s interference was based on the particular factual sequence affecting reasonable opportunity.

The decisive circumstances were that the tax authority had informed the petitioner on 25 January 2024 that “a fresh notice” would be issued; thereafter, a DRC-01 show cause notice was issued on 31 January 2024 without adequately addressing the petitioner’s expectation arising from the earlier communication; and the physical copy of the notice was returned unserved. On these combined facts, the Court accepted the explanation that the petitioner expected a fresh DRC-01A and therefore failed to attend to the Portal or email communication.

The judgment is therefore significant on the principle of effective and reasonable opportunity in GST adjudication, particularly where the authority’s own prior communication creates a legitimate procedural expectation and the subsequent course may cause genuine confusion. The Court restored the proceedings rather than deciding the underlying tax liability on merits. Further, the petitioner was specifically denied liberty to raise limitation grounds, while all other questions were left open.

Sections Involved

Section 73(9) of the KGST/CGST framework: Relates to determination of tax, interest and penalty through an adjudication order in proceedings concerning tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised in cases governed by Section 73.

Section 50 of the KGST/CGST framework: Relates to interest on delayed payment of tax and connected statutory liability.

Articles 226 and 227 of the Constitution of India: Constitutional provisions under which the petitioner invoked the writ and supervisory jurisdiction of the High Court.

Relevant GST Rules and Forms: Form GST DRC-01A, Form GST DRC-01 and consequential recovery proceedings through Form GST DRC-13 were materially connected with the controversy.


Link to download the order -
https://www.mytaxexpert.co.in/uploads/1783067155_420compressed.pdf

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