M/S Shah Associates v. The Assistant Commissioner of Commercial Taxes

e -e1e-eeeee e e ((((((((((((HC-KAR, NC:(2026:KHC:49956( WP(No.(13978(of(2026( ( ,,,,,,,,,, , CNR:(KAHC010304852026(e ( e ( A e INATHEAHIGHACOURTAOFAKARNATAKAAATABENGALURUAe e THDATEDATHISATHEA11 ADAYAOFASEPTEMBER,A2026A e e BEFOREA e THEAHON'BLEAMR.AJUSTICEABAMASHYAMAPRASADA e WRITAPETITIONANO.A13978AOFA2026A(T-RES)A e Ae BETWEEN:AA e A e -M/S-SHAH-ASSOCIATES-REPRESENTED-BY-ITS-PROPRIETOR--e MR.-MOHMMED-SHABBIR-AHAMED--e HAVING-ITS-PRINCIPAL-PLACE-OF-BUSINESS--e AT-NO.128/4,-GROUND-FLOOR,-BUDHAL-ROAD,-NEAR-TAJ-PALACE,-BN-LAYOUT,--e DAVANAGERE,-KARNATAKA,-577001.-e …PETITIONER-e Digitally (BY-SRI.-GOWRI-SHANKER-M.,ADVOCATE)-signed by VANAMALA AND:A N e ALocation: HIGH 1.-THE-ASSISTANT-COMMISSIONER-OF-COURT OF COMMERCIAL-TAXES-KARNATAKA LGSTO-460,-DEVARAJ-URS-LAYOUT,-DAVANAGERE---577006.--

2.-THE-COMMERCIAL-TAX-OFFICER-(VIGILANCE-37)-NO.-305,-3RD-FLOOR,-A-BLOCK,-VANIJYA-THERIGE-KARYALAYA-2,-KORAMANGALA,-BENGALURU-560047.-e -e2e-eeeee e e ((((((((((((HC-KAR, NC:(2026:KHC:49956( WP(No.(13978(of(2026( ( ,,,,,,,,,, , CNR:(KAHC010304852026( ( ( -

3.-THE-JOINT-COMMISSIONER-OF--COMMERCIAL-TAXES-(ADMIN)-DGSTO,-DAVANGERE-DIVISION,--C.R.-BUILDING-'C'-BLOCK,--DEVARAJ-URS-LAYOUT,--DAVANAGERE-–-577006.-…RESPONDENTS-(BY-SMT.JYOTHI-M-MARADI.,-HCGP)--THIS-WP-IS-FILED-UNDER-ARTICLES-226-AND-227-OF-THE-CONSTITUTION-OF-INDIA-PRAYING-TO-----------------------------A)-QUASHING-THE-IMPUGNED-ORDER-NO.-ACCT/460/ITC(B)(87)/DVG/2025-26-DATED-23-02-2026-AT-ANNEXURE-A-PASSED-BY-THE-RESPONDENT-NO.-1-AS-BEING-ILLEGAL,-ARBITRARY,-AND-VIOLATIVE-OF-THE-PRINCIPLES-OF-NATURAL-JUSTICE-AND-THE-FUNDAMENTAL-RIGHTS-OF-THE-PETITIONER;-----------------------------B)-DIRECTION,-COMMANDING-THE-RESPONDENTS-TO-FORTHWITH-UNBLOCK-THE-INPUT-TAX-CREDIT-AMOUNTING-TO-16,45,594/--(8,22,797/--CGST-AND-RS.-8,22,797/--KGST)-IN-THE-ELECTRONIC-CREDIT-LEDGER-OF-THE-PETITIONER-(GSTIN-29BWYPA8025L1ZT);-----------------------C)-DIRECTION-REMANDING-THE-CASE-OF-THE-PETITIONER-TO-THE-FILE-OF-THE-RESPONDENT-NO.1-FOR-FRESH-ADJUDICATION-AND-RECONSIDERATION-IN-ACCORDANCE-WITH-LAW.---THIS-PETITION,-COMING-ON-FOR-ORDERS,-THIS-DAY,-ORDER-WAS-MADE-THEREIN-AS-UNDER:-

CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

ORAL ORDER

The petitioner, a proprietary concern, engaged in the business of cement and iron is aggrieved by the first respondent's order dated 23.02.2026 [Annexure-A] and the first respondent, in exercise of the powers under Rule 86A of the Central Goods and Service Tax/Karnataka Goods and Service Tax Rules,2017 [CGST/KGST Rules], has blocked the petitioner's Input Tax Credit [ITC] in its Electronic Credit Ledger.

¶2Sri. Gowri Shanker, the learned counsel for the petitioner, and Ms. Jyoti M Maradi, the learned High Court Government Pleader, who accepts notice for the respondents, are heard for the disposal of the petition with Sri. Gowri Shanker contending that the petitioner has not had a reasonable opportunity to show cause against the decision to block ITC, asserting that the petitioner was entitled to a pre-decisional opportunity.

¶3The first respondent has blocked ITC for the petitioner on the premise that the petitioner is claiming ITC based solely on the strength of the documents received from certain fictitious entities and ITC must be blocked to secure revenue and to prevent violation. Though it is contended on behalf of the petitioner that no pre-decisional opportunity was extended, Ms. Jyoti M Maradi, places on record a copy of the intimation of personal hearing dated 30.01.2026 and a copy of the postal acknowledgement signed on behalf of the petitioner acknowledging the receipt of such intimation. This completely undermines the petitioner's case that it was not extended an opportunity.

¶4However, the petitioner contends that M/s Excel Trading, which is described as a fictitious entity by the first respondent, is a registered dealer and that its transactions with this entity are under valid invoices and the genuineness of the transaction can be

demonstrated with the assistance of payments made to the entity through proper banking channels. These assertions persuade this Court to conclude that the petitioner must have an opportunity to show cause against the decision to block its ITC and to observe that the first respondent, if the petitioner can indeed produce documents to establish the genuineness of the transaction with M/s Excel Trading, should dissolve the decision. This Court is of the categorical view that this Court's intervention to extend an opportunity cannot automatically unblock the ITC. Hence, the following. ORDER [A] The petition is allowed in-part. [B] The petitioner is reserved with liberty to file a detailed response along with documents to show cause against the first respondent's decision to

block ITC in terms of the decision dated 23.02.2026. [C] The first respondent is directed to consider such response, and extend an opportunity to the petitioner, to decide on whether the decision to block the petitioner's ITC must continue. [D] The petitioner shall file such response before 30.09.2026 and the first respondent shall decide on the continuation of the blocking of the ITC by 31.10.2026.

Sd/- (B M SHYAM PRASAD) JUDGE

nv List No.: 3 Sl No.: 1