Facts of the Case

The petitioner, M/S. Bansal Aradhya Steel Pvt Ltd. (formerly Aradhya Steel Pvt. Ltd.), filed a writ petition before the High Court of Karnataka at Bengaluru seeking to quash a show-cause notice dated 27.09.2023 and a corrigendum show-cause notice dated 28.09.2023 issued by the Deputy Commissioner of Commercial Tax, Audit-2, under Sections 65, 74, 50, 2(105), 44(1), 47(4), 34, 125, 16, 88(3) and 122, read with Rule 53 of the Karnataka Goods and Services Tax Act, 2017. The petitioner's specific grievance was that the notices covered dues pertaining to the period prior to approval of a Corporate Insolvency Resolution Process (CIRP) resolution plan on 24.08.2020, which the petitioner contended could not be reopened once the resolution plan had attained finality. However, before the matter could be heard on merits, the petitioner filed a memo dated 06.12.2023 seeking to withdraw the petition, and the Court accordingly dismissed the petition as withdrawn. The broader legal question sought to be raised — whether tax dues relating to a period predating approval of an insolvency resolution plan can be pursued against the resolution applicant or the corporate debtor once the plan attains finality under the Insolvency and Bankruptcy Code — is a recurring one in GST litigation involving companies that have undergone the CIRP process, and typically turns on the specific terms of the approved resolution plan and the extent to which it addresses statutory dues owed to government authorities. In the present case, however, this question was left entirely open for adjudication in an appropriate future proceeding, since the petitioner chose to withdraw rather than press the challenge to a final hearing. The original show-cause notice and its corrigendum invoked a wide array of provisions of the Karnataka Goods and Services Tax Act, 2017, spanning audit, valuation, interest, definitional and penalty provisions, indicating that the demand proposed to be raised against the petitioner covered multiple heads of alleged non-compliance for the period under scrutiny, and not merely a single, narrow point of dispute. The petitioner's decision to withdraw rather than contest the notices on merits may reflect a range of commercial or procedural considerations, none of which are disclosed in the brief order recording the withdrawal.

Issues Involved

  1. Whether GST show-cause notices issued under the KGST Act, 2017 for a period prior to CIRP resolution plan approval could be validly sustained.
  2. Whether the petitioner could withdraw the writ petition without a decision on the merits of the challenge.

Petitioner's Arguments

  • The show-cause notice and corrigendum show-cause notice, in so far as they pertained to the period prior to approval of the resolution plan dated 24.08.2020, were illegal, arbitrary and devoid of merit.
  • Dues relating to the pre-CIRP period could not be fastened on the petitioner once the resolution plan had been approved.

Respondent's Arguments

  • No substantive response on merits appears on record, as the petition was withdrawn at the memo stage before the respondent's contentions were considered by the Court.

Court Order/Findings

  • On perusal of the memo dated 06.12.2023 filed by the petitioner, the Court noted the request for withdrawal of the petition.
  • The Court dismissed the petition as withdrawn, without recording any findings on the merits of the challenge to the show-cause notices or the CIRP-related contention.
  • No liberty or further directions were separately recorded in the order beyond the withdrawal itself.

Important Clarification

A writ petition challenging GST show-cause notices can be withdrawn by the petitioner at any stage before final hearing, in which event the Court does not examine or pronounce upon the underlying merits, including CIRP-related defences to pre-resolution-plan tax demands.

Sections Involved

  • Karnataka Goods and Services Tax Act, 2017 — Sections 65, 74, 50, 2(105), 44(1), 47(4), 34, 125, 16 and 88(3).
  • Karnataka Goods and Services Tax Act, 2017 — Section 122 and Rule 53 (penalty and audit-related provisions).

Decision – In Favour of

The outcome is not a substantive win for either side. The petition was dismissed as withdrawn at the petitioner's own instance, leaving the merits of the CIRP-based challenge to the GST show-cause notices undecided.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: WP No. 24590 of 2023
  • CNR: 2023:KHC:44050
  • Coram: The Hon'ble Mr Justice B M Shyam Prasad
  • Decision Date: 06.12.2023
  • Disposal Nature: Petition dismissed as withdrawn

Link to Download the Order

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