Facts of the Case

M/s Ashok Kumar Baweja, a 76-year-old sole proprietor, challenged an adjudication order dated 08.01.2025 passed under Section 73(9) read with Sections 6 and 50 of the CGST/KGST Act for tax periods April 2020 to March 2021, along with the consequential summary of order in Form GST DRC-07, before the Karnataka High Court. The order held the petitioner liable for tax on the ground that valid documents had not been submitted, despite the petitioner's claim to have exported aeronautical goods/services under a Letter of Undertaking (LUT), which would ordinarily exempt the supplies from tax.

Issues Involved

  1. Whether the petitioner was properly served with the actual show cause notice under Section 73(1), or only a summary uploaded on the portal, and whether this vitiated the proceedings for an elderly proprietor.
  2. Whether the adjudicating authority erred in confirming the demand without properly examining the Letter of Undertaking already furnished by the petitioner for zero-rated export supplies.

Petitioner's Arguments

  • The petitioner, aged seventy, was not issued a proper notice under Section 73(1) read with Rule 142 — only a summary of the show cause notice was uploaded on the portal — and could not reasonably have known of the proceedings.
  • The petitioner had indeed submitted a Letter of Undertaking with the CGST authorities, which the first respondent failed to consider, merely observing that valid documents had not been submitted; since exported aeronautical goods/services under an LUT cannot be taxed, the order was liable to be set aside.

Respondent's Arguments

  • No specific rebuttal is recorded from the department beyond the impugned order's own finding that the petitioner had failed to submit valid documents in support of the LUT claim; the AGA for the State did not contest the factual submission regarding the LUT once raised.

Court Order / Findings

  • The Court found that the impugned order had not properly considered the Letter of Undertaking said to have been furnished, and that a fresh look at the material was necessary to ensure the liability determination reflected all relevant facts.
  • The petition was allowed in part: the adjudication order dated 08.01.2025 and its DRC-07 summary were quashed and the proceedings restored to the first respondent, with liberty to the petitioner to furnish fresh copies of the relevant Letter of Undertaking within three weeks for the authority's due consideration.
  • The respondents were directed to retain 10% of the amount already deposited by the petitioner in a Fixed Deposit, subject to the first respondent's fresh decision on remand.

Important Clarification

  • Where an assessee claims zero-rated export of goods/services under a Letter of Undertaking, an adjudicating authority confirming a tax demand must specifically examine and rule on that LUT rather than dismiss the claim merely for want of 'valid documents' without particulars.
  • Elderly or unrepresented assessees relying solely on portal-uploaded summaries of show cause notices, rather than the full Section 73(1) notice, present a recurring natural-justice ground for remand under Karnataka High Court practice.

Sections Involved

  • Section 73, CGST Act, 2017 – demand provision under which the order was passed; sub-section (9) concerns the final determination.
  • Section 16, IGST Act, 2017 – zero-rating of exports, the substantive basis of the petitioner's LUT-based exemption claim.
  • Rule 142, CGST Rules, 2017 – prescribes the manner of issuing notices and summaries thereof, relevant to the notice-service grievance.

Decision – In Favour of

The petition was allowed in part, disposed of with directions in favour of the assessee to the extent of a remand for fresh consideration of the LUT, while safeguarding a portion of the deposited amount pending that reconsideration — a mixed outcome rather than a clean win for either side.

Case Details

Court: High Court of Karnataka at Bengaluru. Case No.: Writ Petition No. 14322 of 2025 (T-RES). Neutral Citation: 2025:KHC:18775. Coram: Hon'ble Mr. Justice B M Shyam Prasad. Date of Order: 4th June, 2025.

Link to Download the Order

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