The Karnataka High Court has quashed a GST adjudication order and the corresponding appellate order after finding that the proceedings were founded on a show cause notice issued to an entirely different entity, holding that such proceedings violate the fundamental requirement of prior notice under the Central Goods and Services Tax (CGST) Act, 2017.

The bench of Justice B.M. Shyam Prasad passed the order while allowing a writ petition filed by M/s Azad Steels, which challenged the adjudication order dated May 19, 2025, and the appellate order dated July 31, 2025. The petitioner argued that although proceedings had been initiated under Section 74 of the CGST/KGST Act, the show cause notice relied upon by the department was not addressed to it but to another taxpayer.

The dispute arose from proceedings initiated under Section 74 of the CGST/KGST Act, which deals with determination of tax involving fraud, wilful misstatement, or suppression of facts. According to the petitioner, the department had uploaded a show cause notice dated April 2, 2025, which was addressed to “M/s Vaibhav Info” instead of the petitioner. Despite this, the authorities proceeded to pass an adjudication order against M/s Azad Steels and subsequently upheld the demand in appeal.

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The petitioner contended that an adjudication order cannot legally survive unless it is preceded by a valid show cause notice issued to the concerned assessee. Since the statutory notice forming the basis of the proceedings related to another entity altogether, the entire exercise was without jurisdiction and contrary to the principles of natural justice.

The High Court observed that proceedings under Section 74 must necessarily be founded on a show cause notice issued in the prescribed form to the concerned taxpayer. The Court remarked that if the show cause notice uploaded on the GST portal relates to another entity, any subsequent confirmation of tax liability would effectively amount to passing an order without giving the affected person the statutory notice mandated by law.

The Court further noted that it was undisputed that the adjudication order had been passed on the basis of the show cause notice addressed to M/s Vaibhav Info. Although an intimation in GST Form DRC-01A had been issued to the petitioner and the petitioner had responded to it, this critical discrepancy regarding the show cause notice had not been examined even by the appellate authority.

According to the Court, this failure went to the root of the proceedings and warranted judicial intervention because the statutory requirement of issuing a proper show cause notice could not be dispensed with.

Allowing the writ petition, the Karnataka High Court quashed both the adjudication order dated May 19, 2025, and the Order-in-Appeal dated July 31, 2025. However, the Court clarified that its decision would not prevent the tax authorities from initiating fresh proceedings in accordance with law, if legally permissible. It also preserved the petitioner’s right to raise all available defences in any such fresh proceedings.

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