Facts of the Case

The petitioner, M/S TRA and Company, Tumkur District, represented by its proprietor, challenged a set of orders arising out of a search conducted at its premises on 14.8.2020 by the Deputy Commissioner of Commercial Tax (Vigilance)-1, who seized certain exhibits. The seized material was processed over a period of four months, during which the petitioner appeared before the authorities on several occasions, furnishing clarifications and at times seeking extensions of time; the petitioner last appeared on 16.12.2020. A summary assessment notice dated 21.12.2020 was issued to the petitioner on 28.12.2020, allowing only seven days to respond. Immediately on expiry of that period, a protective assessment order was passed on 05.01.2021 under Section 38(5) of the Karnataka Value Added Tax Act, 2003 read with Section 174 of the KGST/CGST Act. Consequential orders dated 05.01.2021 were also passed by the fourth respondent under Section 64(1) of the KGST/CGST Act and under Section 122(1) and (2) levying penalty. A further order dated 11.02.2021/12.01.2021 in Form GST ASMT-18 was passed by the third respondent under Section 64(2) of the KGST/CGST Act. The petitioner filed this writ petition under Articles 226 and 227 seeking to quash all four orders, or alternatively to remand the matter to the fourth respondent with sixty days to file a reply and an opportunity of personal hearing.

Issues Involved

  1. Whether seven days allowed to respond to a summary assessment notice, following a four-month search-related process, constituted a reasonable opportunity of hearing.
  2. Whether the assessment, penalty and protective orders passed under Sections 64 and 122 of the KGST/CGST Act and Section 38(5) of the KVAT Act should be quashed and the matter remanded for reconsideration.

Petitioner's Arguments

  • The authorities seized voluminous records and took four months to process the seized exhibits, yet allowed the petitioner barely seven days to respond to the summary assessment notice.
  • Immediately upon expiry of the seventh day, the impugned order and consequential demand notices were issued without considering these material circumstances.
  • Alternatively, the petitioner sought remand to the fourth respondent with sixty days to file a reply and an opportunity for personal hearing.

Respondent's Arguments

  • The State filed elaborate pleadings defending the search, the seizure, and the subsequent assessment, penalty and protective orders passed after processing the seized exhibits.
  • The petitioner had, in the course of the four-month process, appeared and either furnished clarifications or sought extensions, indicating adequate engagement before the final notice was issued.

Court Order/Findings

  • The Court proceeded to final disposal on the petitioner's alternative prayer for remand rather than deciding the elaborate pleadings on merits.
  • The petitioner's grievance of inadequate opportunity was upheld — a reasonable opportunity of hearing, not merely seven days, ought to have been granted before passing the summary assessment order.
  • The alternative prayer for remand and reconsideration was accepted, but on terms, given the petitioner had already furnished a bank guarantee for 10% of the demanded amount and offered immovable property as security for the balance.
  • The petition was allowed in part; the impugned orders/notices (Annexures A.1 to A.4) were quashed, and the proceedings restored to the fourth respondent for reconsideration.
  • The petitioner was directed to file its response to the notice dated 21.12.2020 by 25.4.2022, with the fourth respondent to pass fresh orders under Section 64 of the KGST/CGST Act read with Section 38 of the KVAT Act within eight weeks thereafter; the bank guarantee and security were directed to be extended for the same period, with proof to be filed along with the response.

Important Clarification

  • Where a search and seizure process runs over several months, allowing an assessee only seven days to respond to the resulting summary assessment notice does not amount to a reasonable opportunity of hearing.
  • Reconsideration on remand can be conditioned on the assessee maintaining and extending any bank guarantee or security already furnished, so the department's interim protection is not lost by the remand.

Sections Involved

  • Section 64, Karnataka Goods and Services Tax Act, 2017 — summary assessment in special cases.
  • Section 122, Karnataka Goods and Services Tax Act, 2017 — penalty for specified offences.
  • Section 38(5), Karnataka Value Added Tax Act, 2003 (read with Section 174 KGST/CGST Act) — protective assessment provision invoked for pre-GST period liability.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee — the impugned orders were quashed for inadequate hearing time, but the matter was remanded on terms (extended bank guarantee/security) rather than finally decided on merits.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: Writ Petition No. 4872/2021 (T-RES)
  • Coram: Hon'ble Mr. Justice B.M. Shyam Prasad
  • Date of Order: 31.03.2022

Link to Download the Order

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