Bona fide non-participation warrants restoration of GST proceedings to substantiate ITC claims arising from GSTR-2A/3B mismatch.

The petitioner challenged an adjudication order dated 13 August 2024, made under Section 73(9) of the Karnataka Goods and Services Tax Act, 2017, concerning FY 2019–20.

The petitioner said it learned of the order only when its banker received a recovery notice dated 20 February 2026.

It had not participated in the adjudication proceedings, which concerned an alleged mismatch between GSTR-2A and GSTR-3B; it sought an opportunity to respond to the show-cause notice and produce transaction documents, including invoices, payment details and e-way bills

The respondent submitted that the audit observations and show-cause notice had been uploaded to the GST portal, but agreed to restoration of the proceedings for reconsideration on terms

1. Whether the adjudication order should be set aside and the proceedings restored to allow the petitioner to respond to the show-cause notice and substantiate the transactions underlying its GSTR-3B declarations

2. Whether restoration should be subject to conditions, including a deposit toward the disputed tax

Section 73(9) of the KGST Act provides the statutory basis for the impugned adjudication order

The Court referred to Circular No. 193/05/2023, under which a registered taxable person may, in the relevant circumstances involving a supplier’s failure to update data and consequential GSTR-2A non-population, produce documents to establish the genuineness of the transactions

The Court also applied its approach in similar cases of restoring adjudication proceedings where bona fide non-participation was shown, while imposing terms to provide an opportunity to respond to the show-cause notice

The Court accepted that the petitioner could seek to establish the genuineness of the transactions through supporting documents, particularly if the GSTR-2A mismatch resulted from the supplier’s failure to update its data

Although the respondent stated that the notices had been uploaded to the portal, the Court was persuaded that the petitioner’s explanation for not participating was bona fide because it had not otherwise been informed of the proceedings

It therefore considered restoration appropriate, subject to a response to the show-cause notice and a deposit

The adjudication order dated 13 August 2024 was quashed, and proceedings under the show-cause notice dated 7 May 2024 were restored.

The petitioner was permitted to file its response and supporting documents by 30 October 2026 and was directed to deposit 10% of the tax proposed in the show-cause notice.