Facts of the Case

Karsten Homes Private Limited, represented by its Managing Director Mr. Kartheek S. Reddy, challenged two Adjudication Orders bearing No. DCCT (Audit)4.1/GST-ADJ/2024-25 (for the year 2018-19) and No. DCCT (Audit)4.1/GST-ADJ/2025-26 (for the year 2020-21), both dated 07.04.2025, passed by the Deputy Commissioner of Commercial Taxes (Audit-4.1), DGSTO-4, Bengaluru. Proceedings had been initiated under Section 74 of the CGST/KGST Act, 2017, with the second respondent issuing a show-cause notice dated 03.09.2024 calling for an explanation regarding discrepancies in tax liability. The petitioner filed its reply dated 28.02.2025, but the first respondent, without considering the reply, proceeded to pass the impugned orders. The writ petition was filed under Articles 226 and 227 of the Constitution and was disposed of by oral order dated 15.12.2025 by Justice S.R. Krishna Kumar.

Issues Involved

  1. Whether passing the impugned adjudication orders without considering the petitioner's reply to the show-cause notice violated principles of natural justice.
  2. Whether the orders under Section 74 for AY 2018-19 and 2020-21 deserved to be set aside and the matter remitted for fresh consideration.

Petitioner's Arguments

  • The petitioner had filed its reply dated 28.02.2025 to the show-cause notice dated 03.09.2024 well in time, but the respondent, without considering the said reply, proceeded to pass the impugned orders.
  • The impugned orders deserved to be quashed and the matter remitted for reconsideration afresh, in accordance with law, by providing the petitioner an opportunity to submit a reply/produce necessary documents before appropriate orders are passed.

Respondent's Arguments

  • The learned HCGP for the respondents supported the impugned orders and submitted that there was no merit in the petition and it was liable to be dismissed.
  • It was contended that the petitioner did not exercise due diligence in participating in the impugned proceedings.

Court Order / Findings

  • The Court found it an undisputed fact that the petitioner had filed a reply to the show-cause notice, and that the impugned orders were passed without granting the petitioner an opportunity to produce necessary documents.
  • Adopting a justice-oriented approach and to provide the petitioner one more opportunity, the Court deemed it just and appropriate to set aside the impugned orders and remit the matter for reconsideration afresh, with specific directions.
  • The writ petition was allowed; the impugned orders dated 07.04.2025 for AY 2018-19 and 2020-21 were set aside.
  • The petitioner was directed to appear before the second respondent on 02.02.2026 and submit its reply along with relevant documents, upon which the second respondent shall afford a reasonable opportunity of hearing and proceed further in accordance with law.

Important Clarification

  • Passing an adjudication order under Section 74 of the CGST/KGST Act without considering a reply that is already on record amounts to a violation of natural justice, warranting the order being set aside even at the writ stage, without the Court examining the merits of the underlying tax demand.

Sections Involved

  • Section 74 of the CGST/KGST Act, 2017 — determination of tax not paid, short paid or erroneously refunded, or input tax credit wrongly availed/utilised, by reason of fraud, wilful misstatement or suppression of facts.

Decision – In Favour of

Disposed of with directions, in favour of the Assessee — the impugned adjudication orders were set aside and the matter remitted for a fresh hearing after considering the petitioner's reply and documents.

Related Case Laws

  • Other Karnataka High Court rulings setting aside GST adjudication orders passed under Section 73/74 without considering an assessee's reply on record.

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: WP No. 21920 of 2025 (T-RES); NC: 2025:KHC:54477
  • Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
  • Date of Order: 15.12.2025

Link to Download the Order

You can view/download the order here.

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