Court condones delay to allow appeal on disputed reverse charge

Court condones delay to allow appeal on disputed reverse charge tax liability and SCN quantification discrepancies.

Issue

Whether a small security services provider should be allowed to file a late statutory appeal under Section 107 of the CGST Act when they missed the deadline due to lack of professional advice and the assessment orders involve disputed reverse charge mechanism (RCM) liabilities and discrepancy in the tax amount between the SCN and the final order.

Facts

The petitioner is a small operator engaged in the business of supplying security services.
The tax department issued Show Cause Notices (SCNs) to the petitioner for the tax periods FY 2021-22 and FY 2022-23.
Due to non-appearance, ex parte adjudication orders were passed against the petitioner confirming the demand for tax, interest, and penalties.
The petitioner failed to file statutory appeals within the prescribed limitation period and approached the High Court for relief.
The petitioner explained that the delay occurred because they lacked professional advice and could not access the GST portal to view the notices in time.
On the merits of the case, the petitioner contended that the tax liability fell on the service recipient under the Reverse Charge Mechanism (RCM) rather than on them.
The petitioner further pointed out that the tax amount quantified in the final assessment orders differed from the amount originally proposed in the SCNs, violating the statutory framework.

Decision

Held, that earlier judicial orders in similar situations have permitted the filing of appeals under peculiar facts to prevent injustice.
Held, that because the dispute involves key legal and factual issues—specifically the applicability of the reverse charge mechanism and the discrepancy in demand quantification between the SCN and the final order—it is highly expedient to have these issues properly adjudicated on facts.
Held, that the petitioner is permitted to file and pursue their statutory appeals under Section 107 of the Act despite the delay, and the petition is allowed in favor of the assessee.

Key Takeaways

Condonation of Delay for Meritorious Disputes: High Courts may exercise extraordinary jurisdiction to condone delay and permit a late appeal if the case raises strong, unresolved legal and factual defenses, such as a clear RCM exemption.

Demand Cannot Exceed SCN Proposals: The tax department cannot confirm a final demand in an assessment order that differs from or exceeds the amount proposed in the initial Show Cause Notice, as doing so violates the fundamental statutory scheme.

HIGH COURT OF KARNATAKA

Aditya Security Force

Assistant Commissioner of Commercial Taxes (AUDIT 2)^*

C.M. Poonacha, J.

WRIT PETITION NO. 105019 OF 2026 (T-RES)

JUNE 22, 2026

M.N. Shankare Gowda, Adv. for the Petitioner. H.R. Kambiyavar, Adv. and Smt. Nandini Somapur, AGA for the Respondent.

ORDER

1. The present writ petition is filed seeking for the following reliefs:

“This Hon’ble’ High Court may be pleased to issue a Writ of Certiorari or a direction in the nature of Writ of certiorari quashing the ex parte impugned Orders both dated 21.05.2025 in Nos. ACCT(Audit)-2/HPT/GST-ADJN/Order-/2025-26/T and ACCT(Audit)-2/HPT/GST-ADJN/Order-/2025-26/T for the tax periods 2021-22 & 2022-23 passed by the 1^st Respondent (Annexure- C & D) in the Petitioner’s case.

This Hon’ble’ High Court may be pleased to issue a Writ of Certiorari or a direction in the nature of Writ of certiorari quashing the Show Cause Notices in Form GST DRC-01 both dated 08.04.2024 in Nos. CTO/ENF/HPT/U/S73/15/2024-25/7775 & CTO/ENF/HPT/U/S73/16/2024-25/7776 issued by the 2^nd Respondent for the tax periods 2021-22 & 2022-23 (Annexure – A & A1) in the Petitioner’s Case.

This Hon’ble’ High may be pleased to issue such other Writ or Writs or Directions in the nature of a Writ as this Hon’ble’ High Court may deem with fit to grant in the facts and circumstances of the Petitioner’s case. “

2. It is the case of the petitioner that consequent to the show cause notices dated 08.04.2024, issued for the tax period April- 2021 to March-2022 as also April- 2022 to March-2023 (Annexures-A and A1 respectively), the petitioner was unable to appear to contest the same; as a result of which, order of adjudication under Section 73(9) of the Goods and Services Act, 2017¹ was passed with respect to the said period i.e., April-2021 to March-2022 and April-2022 to March-2023 vide Annexures-C and D, respectively.

3. It is further contended that the amount of total tax, interest and penalty mentioned in the notices and in the orders are different, which are contrary to Section 73(7) of the Act. Reliance is placed on a Co-ordinate Bench of this Court in the case of Prestige Nottinghill Investments v. Union of India [2025] 180 taxmann.com 155 (Karnataka)/2026 (114) KGST L.J. 424 (HC).

4. It is further submitted that the petitioner, being a small operator of supplying security services, was not updated with the operations of the systems and hence, was not in a position to open the portal and attend to the notices. That, the petitioner had no proper advice with respect to the tax that was leviable. In the said context, it is submitted that having regard to the notification dated 28.06.2017 (Annexure-S to the writ petition), which has been modified vide notification dated 31.12.2017 (Annexure-T to the writ petition), the tax leviable under the provisions of the Act were to be paid on reverse charge basis by the recipient of the service. That the business of the petitioner is covered under the notification dated 31.12.2018. The respondent No.1-Assistant Commissioner while noticing that the petitioner had provided security services, levied tax on the petitioner, who had provided the services and was not the recipient of the services.

5. Learned AGA submits that the orders dated 21.05.2025 passed under Section 73(9) of the Act are appealable under Section 107(4) of the Act. However, learned counsel for the petitioner submits that the time period contemplated for filing of the appeal having expired, relying on the judgment of a Division Bench of this Court in the case of Yallappa R. Patil v. Assisstant CCTes [2026] 187 taxmann.com 1018 (Karnataka) Order dated 25.09.2025 in W.A.No. 100608/2025 : NC: 2025:KHC-D:13250-DB as well as a Co-ordinate Bench of this court in the case of JJai Hind Enterprises v. Asstt. CCTes [2026] 187 taxmann.com 1017 (Karnataka) Order dated 21.01.2025 in W.P.No. 107549/2024 : NC: 2025:KHC-D:1034 an opportunity be afforded to the petitioner to avail the remedy of appeal as provided under the Act.

6. It is noticed that this Court on earlier occasions, as cited by the learned counsel for the petitioner, having regard to the peculiar facts and circumstances of the said cases, has permitted the availment of the appellate remedy while also noticing that the said orders were not to be treated as a precedent.

7. In the peculiar facts of the present case, since the petitioner did not avail the remedy of filing an appeal and having regard to the fact that the levy of tax on the petitioner itself is sought to be impugned on the ground that the tax was to be paid on reverse charge basis by the recipient of the services, which aspect requires a factual adjudication of the matter as well as the contention of the petitioner that the impugned orders are contrary to Section 73(7) of the Act, it is expedient that the petitioner be permitted to avail the appeal remedy in a recipient of services. However, it is expedient that the petitioner be permitted to avail the appeal within a period of three weeks from date. Accordingly, the present writ petition is disposed of by permitting the petitioner to avail the appeal remedy.

8. If such a remedy is availed within three weeks from date, the said appeal shall be considered by the appellate authority without raising any objection on limitation.

9. It is made clear that this order is passed having regard to the peculiar factual matrix of the present case and may not be treated as a precedent.