GST Audit Objections Preceding DRC-01: Karnataka High Court's Ruling in Sanvi Creations Vs Commercial Tax Officer
Background and Context
When a GST audit culminates in a Show Cause Notice without the assessee's prior objections being expressly addressed, does that omission warrant judicial intervention? This precise question came before the Karnataka High Court in Writ Petition No. 28570 of 2026 (T-Res), decided on 09.09.2026, in the matter of Sanvi Creations Vs Commercial Tax Officer. The Court's disposal of the petition offers important clarity on the relationship between the audit stage and the adjudication stage under the GST framework.
Facts of the Case
Sanvi Creations approached the Karnataka High Court challenging two specific documents:
- The Audit Report dated 31.08.2026 issued by the Commercial Tax Officer (first respondent)
- The Show Cause Notice in Form GST DRC-01 dated 02.09.2026 that followed the audit report
The assessee had filed detailed objections dated 30.07.2026 in response to the audit observations. Its principal grievance before the High Court was that the Commercial Tax Officer proceeded to issue the Show Cause Notice in Form GST DRC-01 without factoring in those objections, thereby exposing it to adjudication proceedings that had not been preceded by a thorough examination of its position.
The petitioner's learned counsels, Sri. Sreehari Kutsa and Sri. Kiran Naidu, pressed the Court for intervention on the ground that bypassing the assessee's pre-notice objections rendered the entire process incomplete and prejudicial.
Revenue's Submission
Ms. Jyoti M. Maradi, learned High Court Government Pleader appearing for the respondents, advanced a two-pronged argument:
The purpose of a GST audit is limited to determining whether circumstances exist that would justify initiation of proceedings under
Section 73orSection 74of the Karnataka Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017 (collectively referred to as the KGST/CGST Act). The audit stage is, by its nature, investigative and not a substitute for adjudication.Even if the audit authority failed to consider the assessee's pre-audit-report objections, that lapse does not become a ground for writ interference because the adjudication process itself contains an adequate remedy.
Section 75(4)of the KGST/CGST Act expressly entitles an assessee to request a personal hearing before any adverse order is passed, and the assessee can file a detailed reply during adjudication to demonstrate that neither the proposition nor the demand flowing from it is sustainable.
Court's Analysis and Findings
The Karnataka High Court examined the rival contentions and concluded that there was considerable force in the Revenue's position. The Court's reasoning proceeded along the following lines: