Summary assessment and registration cancellation are set aside

Summary assessment and registration cancellation are set aside for fresh verification of submitted business documents.

Issue

Whether a summary assessment order alleging ineligible Input Tax Credit (ITC) and a subsequent cancellation of GST registration based on a locked business premise are sustainable when the taxpayer produces extensive transactional documents proving active business operations.

Facts

The petitioner is a registered dealer under the KGST and CGST Acts whose business premises were inspected by enforcement wings.
The inspection team found the premises locked, and neighbors indicated that visits were infrequent and no visible business activity was being carried out.
Based on these inputs, the adjudicating authority concluded that the business was non-existent at the declared location, noted discrepancies pointing to ineligible ITC, and passed a summary assessment order alongside an order canceling the petitioner’s GST registration.
The petitioner challenged both actions, producing additional evidence including e-way bill numbers, dates of supply, trader names, transactional values, vehicle numbers, and ledger extracts for the relevant period.
The petitioner argued that these documents established the genuineness of the transactions and their eligibility for ITC, and contended that the registration cancellation was directly intertwined with the correctness of the summary assessment.

Decision

Summary Assessment Remanded: The High Court held that keeping the summary assessment order active without evaluating the new evidence would cause severe adverse consequences. It set aside the summary assessment and remitted the matter back for fresh consideration.
Burden to Demonstrate Genuineness: The Court directed the petitioner to present and demonstrate the contents of the e-way bills, ledger extracts, and tracking data before the authority to conclusively establish the genuine nature of the business operations and ITC claims.
Registration Restored: Consequent upon setting aside the summary assessment order, the Court ruled that the registration cancellation must also be reversed. The authorities were directed to immediately restore the petitioner’s GST registration certificate.
Liberty to Re-examine: The revenue department retains the liberty to conduct fresh verifications and pass appropriate statutory orders after thoroughly examining the material and documents placed on record by the petitioner.

Key Takeaways

Locked Premises Do Not Prove Fraud: A locked office or a temporary absence during an enforcement inspection is not absolute proof of a non-existent business. Detailed transport records like e-way bills and vehicle logs can override physical inspection assumptions.
Interlinked Relief: When a tax demand and a registration cancellation stem from the exact same enforcement finding, setting aside the core assessment order automatically necessitates the restoration of the taxpayer’s GST registration.
Opportunity to Rebut Enforcement Inputs: Summary actions taken under Section 64 must give way to natural justice. Taxpayers must be given a fair opportunity to produce secondary digital and financial footprints to rebut negative reports compiled by enforcement branches.

HIGH COURT OF KARNATAKA

M R K Enterprises

Commissioner of Commercial Taxes^*

S Sunil Dutt Yadav, J.

WRIT PETITION NO. 7845 OF 2026 (T-RES)

APRIL 15, 2026

E.I. Sanmathi, Dilip M., Nadeem Ahmed and T.P. Venkatesh, Advs. for the Petitioner. K. Hema Kumar, AGA for the Respondent.

ORDER

1. Petitioner has challenged the assessment order passed under Section 64 of the Karnataka Goods and Services Tax Act, 2017 (for short ‘the Act’). Petitioner has made an additional prayer for setting aside of the order of cancellation of registration at Annexure-C dated 19.02.2026.

2. It is the case of the petitioner that the Authority has erred in coming to the conclusion as reflected in the impugned order by way of adjudication in summary assessment proceedings under Section 64 of the Act. It is submitted that the material produced by the petitioner in the present proceedings by way of memo dated 01.04.2026 contains e-way bill number, date of supply, trader name, value, as well as vehicle number, which if taken note of would clear the alleged discrepancies. The ledger account of M/s. M.R.K. Enterprises for the relevant period is also produced along with a memo. It is submitted that petitioner would demonstrate that there were no alleged discrepancies if matter is remitted for reconsideration.

3. Petitioner has also assailed the order of cancellation of registration. It is submitted that the Authority has cancelled the registration on the premise that the business premise of the petitioner was found to be non-existent at the declared place of business. It is submitted that this cancellation of registration is intertwined with the correctness of the order at Annexure-E. It is submitted that if the order at Annexure-E were to be set aside and the matter is remitted for reconsideration, cancellation of registration at Annexure-C ought to be set aside and registration be restored.

4. Perused the order at Annexure-E. The Authority after having received inputs from the various Enforcement Wings had conducted the inspection of the registered place of business of M/s. M.R.K. Enterprises and it was found at the time of inspection that the registered premises was found to be locked. Enquiry was made with the neighbouring residents and shop owners who had also stated that the petitioner would visit the place once in 10 to 15 days and that no business activities were being conducted. On the basis of information furnished, it was found that the Input Tax Credit availed was not in accordance with the actual supplies made and there were discrepancies which would point out to ineligible availment of input tax credit. The Authority on the basis of inspection of the place of business and material had recorded a finding that the petitioner was ineligible to avail of Input Tax Credit.

5. Petitioner has filed memo for production of additional documents and has produced details of the e-way bill number, trader name, quantity and vehicle number. Further, the extract of the ledger accounts of M/s. M.R.K. Enterprises for different periods of time have been produced. It is pointed out that if the Authority was to have relooked into such material, the discrepancies as noticed in the order would be explained.

6. Taking note of the material placed on record and noticing the assertion of the petitioner, it would be appropriate to remit the matter back for reconsideration upon terms. Such order is passed noticing the consequences that would flow if the order is allowed to stand while taking note of the additional documents produced. Needless to state, the contents of the additional documents produced is a matter to be demonstrated before the Authority to be a reflection of genuine transactions.

7. Accordingly, the order at Annexure-E is set aside and the matter is remitted to the 2^nd respondent for fresh consideration. The 2^nd respondent may take note of the additional documents now produced and any other documents that may be produced by the petitioner to demonstrate the genuineness of the transactions and the eligibility regarding Input Tax Credit availed as having been in order.

8. In light of setting aside of the order at Annexure-E, the order at Annexure-C is also set aside and registration certificate is directed to be restored. The Authorities are at liberty to pass appropriate orders in accordance with law after considering the material placed by the petitioner.

9. Petitioner to appear before respondent No.2 without further notice on 18.05.2026. Petitioner to pay cost of Rs.25,000/- to the Karnataka Advocate Clerks Benevolent Trust, High Court Building, Bangalore.

10. In terms of the above, the writ petition is disposed of.