The Karnataka High Court has held that GST authorities cannot mechanically confirm tax demands against exporters of services merely because a Foreign Inward Remittance Certificate (FIRC) was not produced, especially when the taxpayer has furnished alternative banking documents evidencing receipt of export proceeds. 

The bench of Justice B.M. Shyam Prasad has observed that  if a bank has certified receipt of remittances into the taxpayer’s Non-Resident Rupee (NRR) Account, such certificates deserve proper consideration before any adverse order is passed. 

The dispute arose after the Commercial Tax Officer passed an adjudication order dated February 28, 2025, confirming GST proceedings against the petitioner for FY 2020-21. According to the department, the taxpayer had failed to produce the Foreign Inward Remittance Certificate (FIRC) and relevant bank statements, which were considered necessary to establish receipt of export consideration in respect of services exported outside India. 

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Aggrieved by the order, the LLP approached the Karnataka High Court under Articles 226 and 227 of the Constitution seeking quashing of the adjudication order and restoration of the proceedings for fresh consideration. 

Before the High Court, the petitioner submitted that it had commenced its export of services business during the financial year 2019-20 and had regularly filed all GST returns. It argued that while proceedings for the subsequent tax period 2020-21 were initiated, the demand was confirmed solely because FIRCs and certain bank statements were not produced. 

The petitioner further contended that the adjudicating authority ignored several crucial documents already placed on record, including Letter of Undertaking (LUT); Copies of export invoices; and Certificates issued by its banker acknowledging receipt of foreign remittances.

It was also argued that changes in banking procedures relating to issuance of FIRCs meant that the bank certificates furnished by the petitioner effectively served the same evidentiary purpose and ought to have been accepted. 

The High Court found merit in the petitioner’s submissions and observed that if the taxpayer’s banker had acknowledged receipt of foreign remittances into its Non-Resident Rupee Account, such certificates required proper consideration before the proceedings were concluded.

The Court noted that the bank-issued certificates could reasonably be treated as substitutes for FIRCs where they established the receipt of export proceeds. Therefore, confirming the tax demand without examining these documents amounted to an improper exercise of adjudication. 

The Court emphasised that the adjudicating authority was required to evaluate all relevant evidence instead of rejecting the taxpayer’s claim merely due to non-production of a particular document when equivalent evidence was available. 

Allowing the writ petition, the Karnataka High Court quashed the adjudication order dated February 28, 2025. It restored the proceedings to the Commercial Tax Officer and directed the petitioner to produce the bank certificates before the authority on or before July 27, 2026, for fresh consideration in accordance with law. 

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