Karnataka High Court Sets Aside Ex-Parte GST Order Against King Enterprise for Lack of Effective Hearing
Background and Overview
The Karnataka High Court, in Writ Petition No.107390 of 2026 (T-RES), intervened in a matter where an adjudication order had been passed against a registered GST assessee entirely on an ex-parte basis, without the assessee having received a meaningful opportunity to participate in the proceedings. The petitioner, M/S. King Enterprise, a sole proprietorship engaged in ferrous waste and scrap trade — including remelting scrap ingots of iron or steel — successfully challenged both the adjudication order and the accompanying summary order, resulting in the Court quashing both and directing fresh adjudication.
The dispute pertained to the financial year April 2023 to March 2024, and the demand raised against the assessee amounted to Rs.91,00,384/-, covering both tax and penalty components.
Nature of the Assessee and the Business
M/S. King Enterprise is a registered proprietorship firm carrying on business in ferrous scrap and waste, including remelting scrap ingots of iron or steel. The firm holds GSTIN: 29ALHPK4646E3ZX and had been operating within the GST framework as a regular registrant.
The core issue that triggered the adjudication was a proposed reversal of Input Tax Credit (ITC), which was flagged through a show cause notice issued in Form GST DRC-01 dated 09.12.2025 bearing Reference No. ZD291225080066C. The proposed reversal appeared to stem from a mismatch between Form GSTR-3B and Form GSTR-2A returns.
The Adjudication Order and Its Consequences
The respondent — the Assistant Commissioner of Commercial Taxes (Audit) — issued an adjudication order vide Ref No. ACCT/ADT/GDG/DRC-07/2026-27/B dated 29.04.2026, accompanied by a summary order in Form GST DRC-07 bearing Reference No. ZD290426150046E.
Through this order, the adjudicating officer determined the total tax and penalty payable by the assessee at Rs.91,00,384/-. The order further specified that:
- If the assessee paid tax, interest, and a reduced penalty of 50% within thirty days of receiving the order, the proceedings would stand concluded.
- Failure to make such payment within the stipulated period would result in the full 100% penalty becoming payable, along with potential initiation of recovery proceedings.
- As per
Section 74(9)of the GST Act, 2017, a penalty equivalent to 100% of the tax liability under each applicable Act would be attracted if the tax and interest were not paid within thirty days of the issuance of DRC-07.
Why the Proceedings Proceeded Ex-Parte
The assessee's counsel placed on record before the Court that the entire chain of communications — starting from the show cause notice, through reminders, and up to the personal hearing intimations — had been uploaded exclusively on the common GST portal. No alternative mode of communication (such as email or postal dispatch) was demonstrably used by the department.
The following portal-based communications were referenced:
- Show cause notice in Form GST DRC-01 dated 09.12.2025
- Reminder dated 13.01.2026
- Reminder dated 06.02.2026
- Reminder dated 26.02.2026
A significant practical difficulty compounded the matter: the assessee's GST consultant had been changed during the relevant period, and as a result, the portal notifications went unmonitored. Consequently, the assessee was unaware of the proceedings, did not file any reply to the show cause notice, and did not appear at any personal hearing. The adjudicating authority thereafter proceeded to pass the order based on the available documents alone, rendering it an entirely ex-parte determination.
Arguments Raised Before the Court
Assessee's Submissions
Counsel for M/S. King Enterprise advanced the following contentions: