Facts of the Case

Poornesh H.R., proprietor of M/s S.M.S. Electricals, Shivamogga, holding GSTIN 29ATVPP5746Q1Z8, executed rural electrification works for FY 2018-19 under contracts entered into in the pre-GST era. An audit under Section 65 was conducted in 2022, followed by a pre-show cause intimation under Section 73(5) and a show cause notice dated 27.04.2023 under Section 73(1). The Assistant Commissioner passed a final adjudication order dated 22.06.2023 under Section 73(9), raising a demand of Rs. 95,46,390, and subsequently issued an attachment notice dated 23.02.2024 under Section 79(1)(c) to the petitioner's banker, followed by letters dated 18.07.2025 to the Tahsildar and Regional Transport Commissioner seeking details of the petitioner's land and vehicles. The petitioner claimed the entire proceeding, from audit to attachment, had happened ex parte and he came to know of it only when the bank attachment notice arrived.

Issues Involved

  1. Whether an ex-parte Section 73 assessment, admittedly conducted without the petitioner's participation at any stage, and the consequential recovery/attachment measures based on it, can be sustained.

Petitioner's Arguments

  • The entire proceeding — audit, pre-show cause intimation, show cause notice, and final adjudication — had happened ex parte, and the petitioner only learnt of the demand when the attachment notice was sent to his banker, warranting that the demand and all consequential attachment notices be quashed and the matter restored to the show cause stage.

Respondent's Arguments

  • Learned Additional Government Advocate for the respondents sought to refute the petitioner's submission but was not in a position to dispute the undisputed factum that the proceedings had indeed been conducted ex parte throughout.

Court Order / Findings

  • The Court recorded the admitted fact that the proceedings were ex parte from inception, and, without going into the merits of the petitioner's claims regarding the rural electrification contracts, held that the matter deserved to be remitted from the stage of submission of a reply to the show cause notice.
  • The adjudication order dated 22.06.2023 and its DRC-07 summary, the bank attachment notice dated 23.02.2024, and the letters dated 18.07.2025 to the Tahsildar and Regional Transport Commissioner were all quashed, and the proceedings before the Assistant Commissioner were restored to the stage of the petitioner filing a reply to the show cause notice dated 27.04.2023, to be submitted within four weeks.

Important Clarification

  • Where a GST assessment and its entire recovery chain — audit, notice, order, bank attachment, and property-attachment inquiries — are shown to have proceeded ex parte with the assessee never having had a real opportunity to respond, courts will unwind the whole chain back to the show cause notice stage rather than examine or salvage any part of it.
  • An assessee frequently only becomes aware of such proceedings once a bank or property attachment materialises, which itself is treated as strong evidence that no earlier notice was effectively received.

Sections Involved

  • Section 65, CGST Act, 2017 – audit provision under which the department's scrutiny of the pre-GST rural electrification contracts began.
  • Section 73, CGST Act, 2017 – demand provision under which the final order was passed.
  • Section 79(1)(c), CGST Act, 2017 – recovery mechanism used to attach the petitioner's bank account.

Decision – In Favour of

The writ petition was allowed in part in favour of the assessee, with the demand and all attachment measures quashed and the matter restored to the show cause notice stage for a fresh, participative adjudication.

Case Details

Court: High Court of Karnataka at Bengaluru. Case No.: Writ Petition No. 24897 of 2025 (T-RES). Neutral Citation: 2025:KHC:34006. Coram: Hon'ble Mr. Justice M. Nagaprasanna. Date of Order: 1st September, 2025.

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