The Karnataka High Court has quashed an adjudication order and consequential tax demand against a Bengaluru Rural trader, holding that the taxpayer must be given an opportunity to present her case, particularly in light of the amended provisions governing Input Tax Credit (ITC).

The bench of Justice B.M. Shyam Prasad has observed that since the applicability of the amended statutory provision had not been considered during adjudication, the matter deserved to be restored to the adjudicating authority for fresh consideration after granting the taxpayer an effective opportunity to present her case.

The dispute arose after GST authorities initiated proceedings on the ground that the petitioner was ineligible to claim Input Tax Credit because her GSTR-3B returns had been filed beyond the prescribed timelines. The adjudication proceedings culminated in a tax demand after the department recorded that the taxpayer had neither responded to the show cause notice nor participated in the personal hearing conducted through the GST portal.

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Before the High Court, the petitioner contended that she had remained unaware of the notices as she was not computer literate and therefore could not access communications uploaded on the GST portal. She also argued that, on merits, she was entitled to claim ITC by virtue of Section 16(5) of the CGST Act, introduced through legislative amendments with retrospective effect from July 1, 2017. According to her, the amended provision permits the availment of ITC where the relevant returns were filed before November 30, 2021.

The High Court accepted that the petitioner’s explanation regarding her lack of computer literacy could not be dismissed as mala fide. The Court observed that her contention concerning eligibility for ITC under Section 16(5) required substantive examination by the tax authorities before any adverse conclusion could be reached.

Accordingly, the High Court quashed both the adjudication order and the consequential tax demand. The petitioner has been directed to appear before the jurisdictional GST authority on July 23, 2026, without awaiting any further notice and submit all documents supporting her claim for Input Tax Credit. The adjudicating authority has been directed to reconsider the matter in accordance with law after examining the petitioner’s contentions.

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