Karnataka High Court Sets Aside ₹91 Lakh GST Demand Against King Enterprise Over Ex Parte Proceedings

The Karnataka High Court on 11 September set aside a GST tax and penalty demand of Rs. 91,00,384 against King Enterprise, finding that the proceedings had been completed ex parte without affording the business an effective opportunity to present its case.

Justice T.M. Nadaf set aside the tax and summary orders against the company and remanded the matter to the tax authority for fresh consideration. The Bench observed:

“The petitioner should have been more circumspect and cautious while maintaining his documents and records, so also the dealings with the State Revenue Authorities. The matter pertains to revenue of the State, however, at the very same time, it cannot be lost sight that, the entire matter went ex-parte without affording an opportunity under law as per the provisions contained in the GST Act, 2017.”

King Enterprise, which deals in iron and steel scrap, was facing proceedings concerning Input Tax Credit (ITC). The tax department had issued a show-cause notice proposing reversal of the ITC claimed by the business. It submitted that there had been a change in its GST consultant during the relevant period and that the notices and hearing communications uploaded on the GST portal had remained unnoticed. It therefore could not file a reply or appear before the tax authority.

The State contended that the communications had also been sent through email and post. However, it could not produce documents before the Court establishing such communication.

The proceedings were consequently completed in the absence of King Enterprise, resulting in the tax and penalty demand of Rs. 91,00,384. On appeal, it submitted that it had documents explaining the discrepancy noticed by the department between its GST returns and purchase-related tax records. It said its supplier had filed the relevant returns, although the supplier's GST registration was subsequently cancelled.

Following its earlier decision in Zeal Group, the Court granted King Enterprise an opportunity to present its case. It quashed the 29 April 2026 tax and summary orders and remanded the matter to the tax authority for fresh consideration.

The Bench directed King Enterprise to deposit 10% of the tax demand by 5 October 2026. It permitted the business to submit its reply, supporting documents and reconciliation, and directed the authority to consider them and pass a reasoned order within two months.

Accordingly, the High Court set aside the tax and summary orders.

Appearances: Advocates Shridhar Veerapur and Bhagavath P. appeared for the petitioner, M/s King Enterprise. AGA Nandini Somapur appeared for the respondent/State.