The Karnataka High Court has upheld a GST adjudication order that was issued ex parte, meaning it was made without considering the dealer’s response to DRC-01A. The court has instructed the tax authorities to re-evaluate the authenticity of the trader’s transactions by taking into account the invoices, e-way bills, and bank statements that were previously overlooked.
The applicant, M/s K.K. Steel Traders, contested a judgment of adjudication dated 30th August, 2025, made u/s 74 of the GST Act confirming a demand of Input Tax Credit (ITC) claimed purportedly on forged papers. The authority issued an ex parte order based on “clandestine transactions,” claiming that the petitioner did not respond to the Show Cause Notice (SCN) issued in April 2025, along with subsequent reminders. Additionally, the appellate authority quashed the dealer’s appeal based on the limitation.
However, the petitioner’s counsel argued that the authority disregarded a thorough reply submitted by the dealer in August 2023 in response to the original intimation in Form GST DRC-01A. This response included copies of invoices, e-way bills, and bank statements to substantiate the validity of purchases and claims for ITC. A year and a half after the reply, the Show Cause Notice was issued, and the authority did not refer to it.
Because the taxpayers evade the notices u/s 74, the Additional Government Advocate supported the ex parte order. However, the Additional Government Advocate conceded that the Court could stay the enforcement of the demand to provide the petitioner with another opportunity to present their case.
Justice B.M. Shyam Prasad stated that the authority’s conclusion of “no response” was illogical, as the dealer had already submitted documents during the preliminary stage. The court found this oversight to be detrimental and therefore stayed the enforcement of the claim while disposing of the writ petition.
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The court ordered the petitioner to send the original papers directly to the Assessing Authority by July 6, 2026, without waiting for a certified copy of the High Court’s order. If the transactions are verified as legitimate, the contested order will be quashed. However, if the petitioner chooses not to pursue this option, the department is permitted to recover the demand, while the petitioner retains the right to approach the appellate forum.
| Case Title | M/s K.K. Steel Traders vs The Assistant Commissioner of Commercial Taxes |
| Case No. | WRIT PETITION NO. 13670 OF 2026 |
| For Petitioner | SRI. Gowri Shanker M, Advocate |
| For Respondent | SRI. K. Hema Kumar, AGA For R1 AND R2 |
| Karnataka High Court | Read Order |
