Facts of the Case

M/s. RJ Craft Interior, a proprietorship represented by Sri Jagalal Nishad (GSTIN 29AERPN0960K1ZV), filed this writ petition challenging an adjudication order dated 21.12.2023 passed by the Assistant Commissioner of Commercial Taxes, LGSTO-66, Bengaluru, under Section 73 of the GST Act for the tax periods July 2017 to March 2018. The dispute concerned alleged ineligible Input Tax Credit (ITC) — specifically a discrepancy between the ITC reflected in GSTR-3B Table 4(A)(3) and the ITC declared under GSTR-3B Table 3.1(d). The petitioner had not filed a reply to the show cause notice, and the authority proceeded to adjudicate on the basis of the material available with it.

Issues Involved

  1. Whether an adjudication order under Section 73 passed without the benefit of the taxpayer's reply to the show cause notice should be set aside and the matter remitted.
  2. Whether the delay in approaching the Court after the order (dated 21.12.2023) disentitled the petitioner to relief.

Petitioner's Arguments

  • The petitioner had not filed a reply to the show cause notice for bona fide reasons, and in the absence of any response the authority adjudicated purely on the material available with it.
  • The alleged ITC discrepancy (GSTR-3B 4(A)(3) vis-à-vis 3.1(d)) is factual in nature and, if given an opportunity, the petitioner could explain and reconcile the discrepancy.
  • The impugned order should be set aside and the matter remitted for fresh consideration after allowing the petitioner to file its reply.

Respondent's Arguments

  • The Learned High Court Government Pleader accepted notice for the respondent and pointed out that the impugned order was dated 21.12.2023 and the petitioner had approached the Court after undue delay.

Court Order / Findings

  • The Court found that the authority had concluded adjudication without the benefit of a reply to the show cause notice, and that the underlying ITC discrepancy was factual in nature.
  • The impugned order dated 21.12.2023 was set aside and the matter was remitted to the respondent for reconsideration.
  • The petitioner was permitted to file a reply to the show cause notice, after which the respondent authority may proceed to complete adjudication in accordance with law.
  • Recovery proceedings initiated pursuant to the set-aside order were also set aside.
  • The petitioner was directed to appear before the respondent on 19.05.2026 without further notice, and to pay a cost of Rs.10,000 to the Karnataka Advocates Clerks Benevolent Trust as a condition of the relief.
  • The Court did not rule on whether the ITC claimed was in fact eligible — that question is left for the department to decide after considering the petitioner's reply.

Important Clarification

The order is a reminder that Section 73 adjudications completed without a reply from the taxpayer are vulnerable to being set aside on natural-justice grounds, but relief of this kind is typically conditional — here, on payment of costs and on the taxpayer actually filing a substantive reply this time. Businesses facing GSTR-3B mismatch notices should treat the reply stage as the real opportunity to reconcile figures, since courts are reluctant to examine such factual ITC discrepancies themselves.

Sections Involved

  • Section 73, Central Goods and Services Tax Act, 2017 — determination of tax not paid/short paid or ITC wrongly availed, for reasons other than fraud.
  • Article 226, Constitution of India — writ jurisdiction invoked to challenge the adjudication order.

Decision – In Favour of

Disposed of in favour of the petitioner to the limited extent of setting aside the impugned order and remitting the matter for fresh adjudication after a reply is filed — the actual eligibility of the ITC claimed was not decided on merits and remains to be determined by the department.

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: Writ Petition No. 9904 of 2026 (T-RES)
  • Neutral Citation: NC: 2026:KHC:21588
  • Coram: Hon'ble Mr. Justice S. Sunil Dutt Yadav
  • Date of Order: 21 April 2026

Link to Download the Order

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