Cancellation of GST registration of petitioner - petitioner had failed to file his monthly returns for a continues period of six months - adjudication order passed without granting an opportunity of personal hearing to the petitioner - violation of principles of natural justice

Karnataka High Court :-D.V. Constructions v. Union of India & Ors.
Writ Petition No. 38565 of 2025 (T-RES)- Decision dated 19 December 2025

Case Note / Tax Journal Analysis

The decision of the Karnataka High Court in D.V. Constructions v. Union of India & Ors. assumes considerable importance in the evolving jurisprudence surrounding GST adjudication, limitation under section 73 of the CGST/KGST Acts, and the cascading consequences of cancellation of registration followed by ex-parte tax determinations. The ruling also highlights judicial restraint where the constitutional validity of delegated legislation extending limitation is pending consideration before the Supreme Court of India.

The petitioner, a registered works contractor, had obtained GST registration on 08.07.2018. The registration came to be cancelled by an order dated 08.08.2022 on the ground of continuous non-filing of returns for six months. Subsequently, despite the subsistence of cancellation, the department issued an intimation under section 73(5) followed by a show cause notice dated 30.12.2023 under section 73(1) of the CGST/KGST Acts alleging discrepancies in returns for FY 2018-19. This culminated in an ex-parte adjudication order dated 26.03.2024 under section 73(9), confirming a demand of Rs. 68,56,241 along with interest and penalty, without granting personal hearing.

The petitioner approached the High Court challenging not only the adjudication order and the connected DRC-07 summary, but also the very initiation of proceedings on the ground of limitation under section 73(10). A further constitutional challenge was laid to Notification No. 9/2023-CT dated 31.03.2023 and corresponding State Notification No. 06/2023 dated 06.04.2023, issued under section 168A, which extended limitation periods for issuance of show cause notices. The petitioner contended that these notifications were ultra vires and that their validity was already under scrutiny before the Supreme Court in SLP (C) No. 4240/2025.

On behalf of the revenue, reliance was placed on a series of extension notifications, including Notification No. 13/2022 dated 05.07.2022 and subsequent notifications of 2023, to assert that the proceedings were well within time. It was further argued that an efficacious alternative remedy of appeal under section 107 was available.

The High Court, while refraining from adjudicating upon the constitutional validity of the extension notifications, took note of the admitted position that the validity of such notifications was sub judice before the Apex Court. In this backdrop, the Court emphasised that continuation of adjudication proceedings could lead to multiplicity of litigation and conflicting decisions, particularly if the Supreme Court were to strike down or read down the notifications extending limitation.

Significantly, the Court also took cognisance of the principles of natural justice. It accepted the petitioner’s contention that the adjudication order had been passed ex-parte without affording an effective opportunity of personal hearing, and that the petitioner had expressed readiness to file replies, produce documents, file pending returns and discharge tax liability if an opportunity were granted.

Balancing equities, the High Court exercised its writ jurisdiction notwithstanding the alternative appellate remedy and set aside the adjudication order and DRC-07 summary dated 26.03.2024. The matter was remitted to the adjudicating authority with a clear direction that fresh adjudication shall be undertaken only after disposal of SLP (C) No. 4240/2025 by the Supreme Court. Importantly, the Court ordered exclusion of the period between 26.03.2024 and the date of Supreme Court’s decision for the purpose of limitation, thereby safeguarding the interests of both the revenue and the assessee.

On the issue of cancellation of registration, the Court adopted a pragmatic approach. Acknowledging the petitioner’s undertaking to file pending returns and pay up-to-date tax along with interest and penalty, the High Court quashed the cancellation order dated 08.08.2022 and directed restoration of GST registration within four weeks, subject to statutory compliance by the petitioner.

 Ratio and Significance

The ruling reinforces three key principles. First, ex-parte GST adjudication orders, especially those involving substantial demands, are vulnerable if passed without effective opportunity of hearing. Second, where the validity of limitation-extending notifications under section 168A is pending before the Supreme Court, High Courts may justifiably defer adjudication to avoid inconsistent outcomes. Third, cancellation of registration should not be used punitively to permanently disable a taxpayer where compliance can still be achieved through conditional restoration.

The decision thus provides meaningful interim relief to taxpayers caught in the cross-fire of extended limitation notifications, while preserving the authority of the revenue to adjudicate afresh in accordance with law after authoritative pronouncement by the Apex Court.