Belagavi Firm Gets Another Chance To Contest ₹1.51-Crore Ex-Parte GST Demand After Tax Adviser’s Illness, On 10% Deposit: Karnataka HC

The Deputy Commissioner issued a show-cause notice under Section 73(1) of the KGST Act, 2017, alleging differences between GSTR-7 and GSTR-3B and between the petitioner’s P&L/9C and GSTR-3B, and proposing tax, interest and penalty of ₹1,51,08,766.

The petitioner did not appear in the adjudication, stating that its Chartered Accountant/tax practitioner had medical complications and had been hospitalised.

The authority consequently passed an ex parte adjudication order on 16 June 2026, demanding the amount.

The petitioner sought certiorari to quash that order.

The respondents opposed relief, arguing that the petitioner had been notified and that the medical documents post-dated the show-cause notice.

Section 73(1) of the KGST Act, 2017 provides for issuance of a show-cause notice in the relevant tax proceedings; the impugned order was passed under Section 73(9).

The Court applied the principle that an affected taxpayer may be afforded a further effective opportunity where the adjudication has proceeded ex parte, while balancing that opportunity against the revenue’s interest through conditions.

It followed M/s. King Enterprise v. Assistant Commissioner of Commercial Taxes (Audit), W.P. No. 107391/2026 (11 September 2026), which restored proceedings subject to a 10% deposit and submission of supporting material.

The Court also referred to M/s. Zeal Group v. Deputy Commissioner of Commercial Taxes (Audit)-5, W.P. No. 24780/2026 (12 August 2026), for the same conditional-restoration approach.

Although the respondents’ objection that the medical documents post-dated the show-cause notice had force, the Court considered that the documents indicated the petitioner’s representative had suffered medical complications.

Given the substantial tax demand and the petitioner’s request to substantiate its case regarding the transactions, the Court considered a further opportunity appropriate.

Following the approach in King Enterprise, it set aside the ex parte order but conditioned restoration on a 10% deposit and timely production of a response, reconciliation and supporting documents, leaving the merits for the tax authority to determine.

Proceedings were restored to the first respondent, subject to the petitioner depositing 10% of the tax in demand by 13 November 2026.

The petitioner may file its response and supporting documents, including material showing the genuineness of the transactions and reconciliation, by that date; the authority must consider them and pass a reasoned order within two months thereafter.

The deposit is a condition precedent to filing the response and documents and to further adjudication; if it is not made within time, the order allowing the petition stands automatically recalled.