M/S MAHAVEER TRADING COMPANY vs THE STATE OF KARNATAKA
- Court
- Karnataka High Court
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IN THE HIGH COURT OF KARNATAKA AT DHARWAD
TH
DATED THIS THE 15 DAY OF OCTOBER, 2026
BEFORE
THE HON'BLE MR. JUSTICE T.M.NADAF
WRIT PETITION NO.107727 OF 2026 (T-RES)
BETWEEN:
M/S. MAHAVEER TRADING COMPANY
GROUND FLOOR, SY. NO.90, PLOT NO.1/2/3/12/13,
DR. DHAKOJI HOSPITAL COMPOUND,
BS YEDDYURAPPA MARG OLD P B ROAD,
DR. DHAKOJI HOSPITAL, KHASBAG, BELAGAVI,
KARNATAKA-590001.
GSTIN - 29BHAPS6027D1ZD
R/BY HEREIN BY ITS PROPRIETOR
MR. DEEPAK SONI S/O. MAHAVEER PRASAD SONI,
AGED ABOUT 46 YEARS,
ADDRESS PLOT NO.83, RAGHVENDRA NAGAR,
SAI TEMPLE, KHASBAG, VTC - BELAGAVI,
SHAHPUR, BELAGAVI, KARNATAKA-590003
AADHAR NO.308009906763
EMAIL ID [email protected]
MOB – 7688952991.
…PETITIONER
(BY SRI. SHASHANK S.HEGDE, ADVOCATE
SRI. GANESH SHANDAGE, ADVOCATE AND
SMT. PRATHIMA SHIPURKAR S., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
R/BY CHIEF SECRETARY TO
THE GOVERNMENT OF KARNATAKA,
VIDHANA SOUDHA, BENGALURU-560009.
2. THE COMMISSIONER OF COMMERCIAL TAXES,
COMMERCIAL TAX DEPARTMENT,
Digitally signed by
THEJAS KUMAR N
Location: High
Court of Karnataka,
Dharwad Bench
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GOVERNMENT OF KARNATAKA,
COMMERCIAL TAX OFFICE-1,
FIRST MAIN ROAD, GANDHINAGAR,
BENGALURU-560009.
3. THE JOINT COMMISSIONER OF COMMERCIAL
TAXES (ENFORCEMENT), NORTH ZONE,
SUMOULYA SOUDHA, CLUB ROAD,
BELAGAVI-590001.
4. THE COMMERCIAL TAX OFFICER,
(ENFORCEMENT)-9, BELAGAVI,
SUMOULYA SOUDHA, CLUB ROAD,
BELAGAVI-590001.
…RESPONDENTS
(BY SRI. SHARAD V.MAGADUM, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO (A)
DECLARE THAT THE IMPUGNED ACTION OF RESPONDENT
NO.03 IN ISSUING IMPUGNED ENDORSEMENT VIDE
REFERENCE NUMBER:PA/PR-19/2026-27 B-1703 DATED
21.08.2026 (ANNEXURE-B) IS PERVERSE, ARBITRARY, AND
VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE, ISSUED
WITHOUT DUE APPLICATION OF MIND, ULTRA VIRES RULE 86A
OF CGST RULES, VIOLATIVE OF THE FUNDAMENTAL RIGHTS AS
GUARANTEED UNDER ARTICLE 19(1)(G), 14 AND 21 OF THE
CONSTITUTION OF INDIA; (B) DECLARE THAT IMPUGNED
ACTION OF RESPONDENT NO.03 IN PASSING IMPUGNED
ORDER UNDER RULE 86A BEARING REFERENCE ORDER NO.
JCCT/ENF/NZ/BGV PA/PR-19/ITCB-09/2026-27 DATED
28.08.2026 (ANNEXURE A) IS PERVERSE, ARBITRARY, AND
VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE, ISSUED
WITHOUT DUE APPLICATION OF MIND; ULTRA VIRES RULE 86A
CGST RULES, VIOLATIVE OF THE FUNDAMENTAL RIGHTS
GUARANTEED UNDER ARTICLE 19(1)(G), ARTICLE 14 AND 21
OF THE CONSTITUTION OF INDIA; (C) DECLARE THAT THE
IMPUGNED ACTION OF RESPONDENT NO.03 IN ISSUING
IMPUGNED ENDORSEMENT VIDE REFERENCE NUMBER
NO.PA/PR-19/2026-27/B-1870 DATED 04.09.2026 (ANNEXURE-
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E) IS PERVERSE, ARBITRARY, AND VIOLATIVE OF THE
PRINCIPLES OF NATURAL JUSTICE, ISSUED WITHOUT DUE
APPLICATION OF MIND, ULTRA VIRES RULE 86A OF CGST
RULES, VIOLATIVE OF THE FUNDAMENTAL RIGHTS AS
GUARANTEED UNDER ARTICLE 19(1)(G), 14 AND 21 OF THE
CONSTITUTION OF INDIA; (D) ISSUE A WRIT OF CERTIORARI,
OR SUCH OTHER WRIT, ORDER OR DIRECTION IN THE NATURE
OF A WRIT OF CERTIORARI UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA CALLING FOR THE RECORDS
PERTAINING TO THE PETITIONER CASE AND AFTER GOING IN
TO THE VALIDITY AND LEGALITY THEREOF, QUASH AND SET
ASIDE THE IMPUGNED ENDORSEMENT VIDE NUMBER
NO.PA/PR-19/2026-27 B-1703 DATED 21.08.2026 (ANNEXURE-
B); (E) ISSUE A WRIT OF CERTIORARI, OR SUCH OTHER WRIT,
ORDER OR DIRECTION IN THE NATURE OF A WRIT OF
CERTIORARI UNDER ARTICLE 226 OF THE CONSTITUTION OF
INDIA CALLING FOR THE RECORDS PERTAINING TO THE
PETITIONER CASE AND AFTER GOING IN TO THE VALIDITY
AND LEGALITY THEREOF, QUASH AND SET ASIDE THE
IMPUGNED ORDER PASSED UNDER RULE 86A BEARING
REFERENCE ORDER NO.JCCT/ENF/NZ/BGV PA/PR-19/ITCB-
09/2026-27 DATED 28.08.2026 (ANNEXURE-A); (F) ISSUE A
WRIT OF CERTIORARI, OR SUCH OTHER WRIT, ORDER OR
DIRECTION IN THE NATURE OF A WRIT OF CERTIORARI UNDER
ARTICLE 226 OF THE CONSTITUTION OF INDIA CALLING FOR
THE RECORDS PERTAINING TO THE PETITIONER CASE AND
AFTER GOING IN TO THE VALIDITY AND LEGALITY THEREOF,
QUASH AND SET ASIDE THE IMPUGNED ENDORSEMENT VIDE
REFERENCE NUMBER NO.PA/PR-19/2026-27/8-1870 DATED
04.09.2026 (ANNEXURE-E); PASSED BY THE RESPONDENT
NO.3 AND (G) PASS SUCH OTHER OR FURTHER ORDERS AS
THIS HON’BLE COURT MAY DEEM FIT AND PROPER IN THE
FACTS AND CIRCUMSTANCES OF THE CASE, AND IN THE
INTERESTS OF JUSTICE AND EQUITY, INCLUDING THE COSTS
OF THIS WRIT PETITION. FOR WHICH ACT OF KINDNESS, THE
PETITIONER SHALL AS IN DUTY BOUND, EVER PRAY.
THIS PETITION, COMING ON FOR FRESH MATTERS, THIS
DAY, ORDER WAS MADE THEREIN AS UNDER:
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CORAM: HON'BLE MR. JUSTICE T.M.NADAF
ORAL ORDER
This petition is filed by the petitioner seeking following
reliefs:
“(a) Declare that the impugned action of Respondent
No.03 in issuing impugned Endorsement vide
reference number: PA/PR-19/2026-27 B-1703
dated 21.08.2026 (Annexure-B) is perverse,
arbitrary, and violative of the principles of natural
justice, issued without due application of mind;
ultra vires Rule 86a of cgst rules, violative of the
fundamental rights as guaranteed under Article
19(1)(G), 14 and 21 of the Constitution of India;
(b) Declare that impugned action of Respondent No.03
in passing impugned Order under Rule 86a bearing
reference Order No. JCCT/ENF/NZ/BGV PA/PR-
19/ITCB-09/2026-27 dated 28.08.2026 ( Annexure
A ) is perverse, arbitrary, and violative of the
principles of natural justice; issued without due
application of mind; ultra vires Rule 86A CGST
Rules, violative of the fundamental rights
guaranteed under Article 19(1)(G), Article 14 and
21 of the Constitution of India;
(c) Declare that the impugned action of Respondent
No.03 in issuing impugned Endorsement vide
reference number NO.PA/PR-19/2026-27/B-1870
dated 04.09.2026 (Annexure E) is perverse,
arbitrary, and violative of the principles of natural
justice, issued without due application of mind;
ultra vires Rule 86A of CGST Rules, violative of the
fundamental rights as guaranteed under Article
19(1)(G), 14 and 21 of the Constitution of India;
(d) Issue a Writ of Certiorari, or such other Writ, Order
or direction in the nature of a Writ of Certiorari
under Article 226 of the Constitution of India calling
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for the records pertaining to the Petitioner case and
after going in to the validity and legality thereof,
quash and set aside the impugned Endorsement
vide number NO.PA/PR-19/2026-27 B-1703 dated
21.08.2026 (Annexure B) ;
(e) Issue a Writ of Certiorari, or such other writ, Order
or direction in the nature of a Writ of Certiorari
under Article 226 of the Constitution of India calling
for the records pertaining to the Petitioner case and
after going in to the validity and legality thereof,
quash and set aside the impugned Order passed
under Rule 86a bearing reference Order
No.JCCT/ENF/NZ/BGV PA/PR-19/ITCB-09/2026-27
dated 28.08.2026 (Annexure A);
(f) Issue a Writ of Certiorari, or such other Writ, Order
or direction in the nature of a writ of Certiorari
under Article 226 of the Constitution of India calling
for the records pertaining to the petitioner case and
after going in to the validity and legality thereof,
quash and set aside the impugned Endorsement
vide reference number NO.PA/PR-19/2026-27/8-
1870 dated 04.09.2026 (Annexure E) ; passed by
the Respondent No.3 and
(g) Pass such other or further orders as this Hon’ble
Court may deem fit and proper in the facts and
circumstances of the case, and in the interests of
justice and equity, including the costs of this writ
petition.
For which Act of kindness, the Petitioner shall as in
duty bound, ever pray.”
2. Heard Sri. Ganesh Shandage, learned counsel
appearing for Sri. Shashank S. Hegde, learned counsel for the
petitioner and Sri. Sharad V. Magadum, learned AGA for the
respondents-revenue.
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3. The petitioner is before this Court aggrieved by the
action of the revenue, blocking the Input Tax Credit of
Rs.43,89,637/- available in the Electronic Credit Ledger of the
petitioner, by invoking Rule 86A of Karnataka Goods and
1
Services Tax /Central Goods and Services Tax Rules, 2017 .
4. Learned counsel Sri. Ganesh Shandage submits that
without affording any opportunity in terms of principles of
natural justice, the action which is under challenge has been
taken by the respondents- revenue, causing prejudice to the
interest of the parties. Learned counsel referring to the
judgment of the Division Bench of this Court in the case of K-9-
2
ENTERPRISES VS. STATE OF KARNATAKA , would submit
that, a pre-decisional hearing is required before blocking credit
under Rule 86A as it entails serious civil consequences. The
State revenue in this case has failed to adhere to the same and
without giving a pre-decisional hearing, blocked the ITC for
Rs.43,89,637/-.
1
Hereinafter referred to as ‘the KGST/CGST Rules, 2017’
2
(2024) 167 taxmann.com 499 (Karnataka), [02.04.2024]
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4.1 He further submits that the Division Bench considering
the said provision and the actions contemplated in that
Writ Appeal, quashed the impugned order, blocking the
ITC. Learned counsel further invited the attention of this
Court to the conclusion arrived by the Division Bench at
paragraph No.9.11. The said paragraph reads as under:
“ 9.11 The aforesaid facts and circumstances are
sufficient to come to the unmistakable conclusion
that in the absence of valid nor sufficient material
which constituted 'reasons to believe' which was
available with respondents, the mandatory
requirements/ pre-requisites / ingredients/
parameters contained in Rule 86A had not been
fulfilled/ satisfied by the respondents-revenue who
were clearly not entitled to place reliance upon
borrowed satisfaction of another officer and pass
the impugned orders illegally and arbitrarily
blocking the ECL of the appellant by invoking Rule
86A which is not only contrary to law but also the
material on record and consequently, the impugned
orders deserve to be quashed.
Point No.2 is also accordingly answered in favour of
the appellants by holding that the respondents-
revenue committed a grave and serious
error/illegality/infirmity in passing the impugned
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orders blocking the Electronic Credit Ledgers of the
Appellants by invoking Rule 86A of the CGST Rules.
RE: Point No.3.”
4.2 He further submits that, failure to grant opportunity on
the principles of natural justice, the order itself is
unsustainable in law and required to be quashed.
4.3 The Division Bench of this Court has read the principles of
natural Justice in Rule 86A, directing the State revenue to
provide pre-decisional hearing to the party who would be
affected by any action contemplated i.e., blocking the
ITC. Learned counsel Sri. Ganesh Shandage submits that
in the case on hand, though they have issued notice of
hearing, but not at all considered any document produced
and provided an opportunity to make submission on that.
With this, he sought to allow the Writ Petition.
5. Sri. Sharad V. Magadum, learned AGA for revenue,
however, submits that the notice was issued providing them
three days time to submit their documents. However, it is the
petitioner who has not produced appropriate documents to
consider his claim prior to passing of the order. In that view of
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the matter, the order is not suffering from any vices and there
is no interference required.
6. However, Sri.Sharad V.Magadum, learned AGA with
all fairness submits that now the entire State revenue has been
instructed by the appropriate authority to follow K-9-
ENTERPRISES (supra), delivered by the Division Bench of this
Court in order to avoid unnecessary repeated petitions before
the Court.
7. A perusal of the impugned order clearly shows that
the same is passed without adhering to 86A as observed by the
Division Bench in K-9-ENTERPRISES (supra). This Court finds
force in the argument of learned counsel Sri.Ganesh Shandage.
8. Though Sri.Sharad V.Magadum, learned AGA
contends that three days notice has been contemplated,
providing an opportunity. However, in view of production of
documents and to substantiate their claim, the three days
notice cannot be called as sufficient notice in terms of K-9-
ENTERPRISES (supra). The principles of natural justice are
not an empty formality, rather they form essential bedrock of
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fairness, equity, and the Rule of law in administrative and
judicial decision making. The principles of natural justice is
linked directly to the fundamental right like Article 14 and
Article 21 of the Constitution of India. The Hon’ble Supreme
Court in the case of MANEKA GANDHI VS. UNION OF
3
INDIA , ruled that Administrative and quasi judicial actions
must be “right, just and fair” and never arbitrary or oppressive.
Omitting of fair hearing typically renders an order void ab initio .
Accordingly, this Court proceeds to pass the following:
ORDER
i. The Writ Petition is allowed.
ii. The impugned order dated 28.08.2026
(Annexure- A) and further actions contemplated
thereafter are quashed.
iii. The order of blocking ITC is set aside and
authorities are directed to unblock the same.
iv. The concerned authority shall provide
appropriate opportunity to the petitioner to place
the records in terms of the transactions claiming
ITC and the authorities are directed to consider
3
1978 AIR 597
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the same in accordance with law, prior to taking
any action as contemplated, strictly in
consideration of observation made by the
Division Bench in K-9-ENTERPRISES (supra).
v. The petitioner is directed to appear before the
authority on 27.10.2026 and the authority shall
provide an opportunity to produce documents
and hear the party prior to passing any action, if
the same is necessitated, under Rule 86A of
KGST/CGST Act, 2017.
Sd/-
(T.M.NADAF)
JUDGE
RKM
CT: UMD
List No.: 1 Sl No.: 4