Facts of the Case

The petitioner, M/s Pericorp, challenged the adjudication order passed under Section 73(9) of the Karnataka Goods and Services Tax Act, 2017, contending that the assessment was completed ex parte without granting an effective opportunity to submit a reply to the show cause notice. The dispute related to the tax period from April 2021 to March 2024. During the adjudication proceedings, the petitioner had submitted a communication dated 24.05.2024 regarding revised turnover. Subsequently, the petitioner claimed that the said communication did not accurately represent its case and that additional material was available which required consideration.

Issues Involved

  1. Whether an adjudication order passed under Section 73(9) of the KGST Act without considering the petitioner's complete explanation deserves to be set aside.
  2. Whether the matter should be remanded for fresh adjudication where the petitioner seeks to clarify an earlier communication and produce additional evidence.
  3. Whether the principles of natural justice require a fresh opportunity before finalizing the assessment.

 Petitioner’s Arguments

  • The adjudication order was passed ex parte without an effective opportunity to file a detailed reply to the show cause notice.
  • The communication dated 24.05.2024 regarding revised turnover was relied upon by the authorities while completing the assessment.
  • Subsequently, the petitioner realized that the said communication did not materially explain the factual position.
  • The petitioner possessed additional documents and material capable of clarifying the discrepancies and requested an opportunity to place the same before the adjudicating authority.
  • The assessment should therefore be remanded for fresh adjudication in the interest of justice.

 Respondent’s Arguments

  • The tax authorities completed the adjudication proceedings after considering the communication submitted by the petitioner during the proceedings.
  • The adjudication order was based upon the factual material available before the department at the relevant time.
  • Since the petitioner itself had furnished the communication relied upon, the authorities proceeded to finalize the assessment accordingly.

Court Order / Findings

The Karnataka High Court observed that the adjudication order substantially relied upon the petitioner's communication dated 24.05.2024. Since the petitioner asserted that the communication required clarification and additional material was available for proper appreciation of facts, the Court held that the dispute involved factual issues requiring reconsideration.

Accordingly, the Court:

  • Set aside the adjudication order passed under Section 73(9) of the KGST Act.
  • Remanded the matter to the adjudicating authority to the stage of filing reply to the show cause notice.
  • Directed the petitioner to explain the circumstances relating to the communication dated 24.05.2024 and produce all supporting material.
  • Directed the petitioner to pay costs of ₹10,000 to the Advocate Clerks Benevolent Fund.
  • Directed the petitioner to appear before the concerned authority on 25.05.2026 without further notice.
  • Kept all contentions of both parties open for fresh adjudication.

Important Clarification

  • An assessment passed under Section 73 may be remanded where the taxpayer demonstrates that the adjudication proceeded without effective opportunity or where factual clarification is necessary.
  • Reliance on an earlier communication submitted by the taxpayer does not prevent the Court from granting a fresh opportunity if additional evidence requires consideration.
  • The High Court emphasized adherence to the principles of natural justice where factual disputes remain unresolved.
  • Remand restores the proceedings to the stage of reply to the show cause notice and does not decide the tax liability on merits.

Sections Involved

  • Section 73(8) of the Karnataka Goods and Services Tax Act, 2017
  • Section 73(9) of the Karnataka Goods and Services Tax Act, 2017
  • Articles 226 and 227 of the Constitution of India

Link to Download the Order https://mytaxexpert.co.in/uploads/1784872200_1938compressed.pdf

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