The High Court of Karnataka has overturned a decision made by the Commercial Tax Department regarding Goods and Services Tax (GST). The court stated that the authority responsible for reviewing decisions cannot take action without first following the required procedures for GST assessments.
A writ petition contesting a revision order issued via the Joint Commissioner of Commercial Taxes in Bengaluru has been approved by the bench of Justice S.R. Krishna Kumar and declared the proceedings illegal, arbitrary, and without authority of law.
The court ruled that, “A plain reading of the provision clearly indicates that after issuance of the audit report it is incumbent upon the department to initiate action under Section 73 or 74. Without doing so, initiating revision is contrary to law,”
The case emerged via a revision order on May 14, 2025, issued via the Joint Commissioner of Commercial Taxes, DGSTO-6, Bengaluru, invoking revisional powers u/s 108 of the GST law.
The applicant contested the jurisdiction of the authority to reopen concluded audit proceedings without executing the regulatory proceedings u/s 73 or 74 of the GST legislation for the determination of tax liability.
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From the submissions provided before the court, the tax department had conducted an audit for the related duration and issued a revised audit observation dated November 17, 2023.
The taxpayer answered on November 24, 2023, which culminated in the issuance of a final audit report in Form GST ADT-02 dated December 15, 2023. Even after closing the audit via the formal report, the department thereafter asked to reopen the case via initiating the revision proceedings u/s 108 through a notice on October 19, 2024.
The applicant’s senior counsel said that after an audit culminates in a final report, any tax recovery, penalty, or interest needs to be routed via appropriate assessment proceedings under Section 73 or 74. It was claimed that bypassing such provisions and invoking revision leads to non-compliance with the regulatory authority.
The Additional Government Advocate, representative of the State, admitted before the court that no proceedings u/s 73 or Section 74 had been initiated to date. But the department asked for the liberty to start these proceedings thereafter if allowed by the law.
The approach of the department has been rejected by the court, which said that Section 65(7) of the GST law obligates the initiation of proceedings u/s Section 73 or 74 when the audit shows tax discrepancies, including short payment, wrongful ITC, or erroneous refunds. The court concluded that invoking revision without first launching regulatory proceedings was not permitted in law.
The court, while permitting the writ petition, quashed the revision order on May 14, 2025, and all consequential proceedings. But the court allotted the liberty to the tax department to start fresh proceedings against the taxpayer as per the law, if so advised, subject to regulatory limitations and safeguards.
| Case Title | M/s Navayuga Engineering Company Limited vs. Joint Commissioner of Commercial Taxes |
| Case No. | NO.26955 OF 2025 (T-RES) |
| For the Petitioner | Sri. G. Shivadass, Sri. Rishab.j., Sri Prashanth S., Smt. Shri Gayathri and Smt. Sneha Suresh |
| For the Respondent | Sri. G. Shivadass, Sri. Rishab J., Sri Prashanth S., Smt. Shri Gayathri and Smt. Sneha Suresh |
| Karnataka High Court | Read Order |
