GST Demand Quashed for Breach of S. 75(4): Karnataka HC Rules Personal Hearing Mandatory Before Adverse Order

The Karnataka High Court, Dharwad Bench, has set aside a GST demand order of over Rs. 7.23 crore after holding that the tax department violated the mandatory requirement of granting a personal hearing under Section 75(4) of the GST Act before passing an adverse order. The bench of Justice Lalitha Kanneganti has observed that Section 75(4) of the GST Act makes it clear that an opportunity of hearing shall be granted where a request is received. An opportunity of personal hearing is not afforded to the petitioner. The petitioner is a public limited company registered under the Karnataka Goods and Services Tax Act, 2017, primarily engaged in manufacturing cement and generating electricity through solar power for captive consumption. The company had set up solar power plants of 20 MW and later 10 MW capacity at Bisarahalli village in Koppal district, pursuant to approvals granted by the Government of Karnataka. To clarify its tax position, the company had approached the Authority for Advance Rulings (AAR) under the CGST/KGST Act on the eligibility of Input Tax Credit (ITC) on capital goods and input services used for the erection, installation, and commissioning of the solar power plant. The AAR ruled in favour of the assessee, holding that ITC was admissible since the electricity generated was captively consumed in its cement manufacturing units. Relying on the advance ruling, the petitioner continued to avail ITC and filed regular GST returns. During an audit conducted for the period April 2021 to March 2022, the Deputy Commissioner of Commercial Taxes (Audit), Bagalkot, raised objections alleging ineligibility of ITC on various heads, including solar plant equipment, insurance and financial services, works contract services, construction activities, and vehicle repairs. A series of communications followed, including an audit observation letter, intimation under Section 73(5), and a show cause notice under Section 73(1) of the GST Act. The petitioner submitted detailed replies at each stage, disputing the allegations and requesting withdrawal of proceedings. However, without granting any opportunity of personal hearing, the audit authority passed an order dated 12 November 2025 disallowing the ITC and raising a tax demand of ₹7,23,74,871 along with applicable interest and penalty. Aggrieved by this, the petitioner approached the High Court. The central issue before the Court was whether the GST department could pass an adverse order disallowing ITC without granting a personal hearing, despite the express mandate under Section 75(4) of the GST Act. The petitioner also contended that although an appellate remedy under Section 107 of the GST Act was available, it was not an efficacious alternative remedy in the facts of the case, as the advance ruling authority that had decided the issue earlier was superior to the appellate authority. The High Court held that Section 75(4) of the GST Act clearly mandates the grant of an opportunity of hearing where an adverse decision is contemplated. The Court noted that it was undisputed that no personal hearing was afforded to the petitioner before passing the impugned order. On the issue of maintainability of the writ petition, the Court accepted the petitioner’s argument that the availability of an alternative statutory remedy does not bar the exercise of writ jurisdiction where there is a clear violation of principles of natural justice. The Court further observed that in the peculiar facts of the case, the appellate remedy could not be treated as effective or efficacious. The High Court set aside the GST demand order dated 12 November 2025, remanded the matter back to the audit authority for fresh consideration and directed the authority to pass a fresh order only after granting a proper opportunity of personal hearing to the petitioner, as mandated under Section 75(4) of the GST Act. Case Details Case Title: M/S. Shri Keshav Cements And Infra Ltd. Versus The Dy. Commissioner Of Commercial Taxes (Audit) Case No.: Writ Petition No.109976 Of 2025 (T-Res) Date: 21/01/2026 Counsel For Petitioner: Sangram S.Kulkarni Counsel For Respondent: Girija S.Hiremath Click Here To Read Order Read More: Threshing of Tobacco Leaves Not Taxable Under Business Auxiliary Service; CESTAT Quashes GTA Demand for Want of Consignment Note

GST Demand Quashed for Breach of S. 75(4): Karnataka HC Rules Personal Hearing Mandatory Before Adverse Order

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