The Karnataka High Court has granted interim relief in a GST dispute involving parallel proceedings initiated by Central and State tax authorities for the same tax period. 

The bench of Justice B M Shyam Prasad stayed the adjudication order and all consequential proceedings until further orders, while permitting the petitioner to withdraw its pending appeal subject to the pre-deposits remaining with the authority.

The petition arose from proceedings initiated under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 for the period from July 1, 2017 to November 30, 2022.

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The petitioner’s principal grievance was that both Central and State authorities had initiated proceedings concerning the same turnover, potentially exposing it to the burden of discharging the same tax liability twice.

According to the proceedings recorded by the High Court, the Central authorities had issued a common notice on June 28, 2024 covering the relevant tax period. The State authority subsequently issued notices and completed its proceedings later.

Before the High Court, the petitioner advanced several grounds in support of its request for interim protection.

First, it contended that two parallel proceedings could not be maintained in respect of the same turnover if that ultimately resulted in the petitioner being called upon to discharge the tax liability twice.

Second, the petitioner argued that because the Central authorities had initiated proceedings first, the subsequent proceedings and order of the State authority ought to be stayed.

The petitioner also sought a stay of the Central authority’s order on the ground that it had originated from a common show cause notice covering different tax periods.

An important legal issue before the High Court concerned whether a single common show cause notice can validly sustain proceedings and orders covering different tax periods.

The petitioner submitted that this issue was already pending consideration before the Supreme Court and that interim orders had been granted in proceedings concerning the same question.

The Karnataka High Court considered this aspect significant because, if the Supreme Court ultimately holds that one show cause notice cannot sustain orders relating to different tax periods, the proceedings based upon the common notice could themselves fail.

The petitioner had already challenged the State authority’s order dated May 2, 2025, concerning the period from July 2017 to March 2020. In that appeal, it had deposited ₹28,62,660, while another pre-deposit of ₹8,35,832 had also been made.

After considering the rival submissions, the High Court held that the fact that the Central authorities had commenced proceedings first required the merits of the Central order to be examined. Consequently, the Court found that the State authority’s orders under Sections 73 and 74 ought to remain stayed.

The Court simultaneously granted liberty to the petitioner to withdraw its pending appeal, subject to the condition that the pre-deposits already made would remain subject to further orders of the High Court.

The High Court went a step further and stayed the Central authority’s order as well.

The Court reasoned that the Central proceedings themselves could ultimately fail if the Supreme Court decides that a single show cause notice cannot sustain adjudication orders relating to different tax periods.

Thus, the interim protection was not confined merely to the later State proceedings. The Court ordered a stay of the impugned adjudication order and all consequential proceedings until further orders.

While granting interim relief, the High Court did not direct immediate release of the amounts already deposited.

Instead, it permitted the petitioner to withdraw its pending appeal on the condition that the pre-deposits would continue to be held by the authority and remain subject to further orders of the Court.

This ensures that the amounts remain available for adjustment or further directions depending upon the eventual outcome of the writ proceedings.

The High Court has directed that the petition be re-listed on November 3, 2026. The interim order will remain operative until further orders.

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