Dismissed

Mohammed Ghani v. the Commissioner of Central Tax

Karnataka HC17 Mar 2026WP/30773/2025

Case brief

AI extract

What is this about?

The High Court of Karnataka quashed a suo-moto rectification order imposing service tax because it was passed without providing the petitioner an opportunity of hearing, violating Section 74(4). The rectification is set aside and the matter remitted to the department to reconsider proceedings in light of the Order-in-Appeal.

What did the court decide?

The impugned rectification order dated 11.01.2023 is set aside. The matter is remitted to respondent No.2 to reconsider proceedings. Bank account attachment is to be rescinded.

Mohammed Ghani Vs the Commissioner of Central Tax — GST and Indirect Tax | Karnataka HC (2026)

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NC: 2026:KHC:15558 WP No. 30773 of 2025

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 17^TH DAY OF MARCH, 2026

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BEFORE

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THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 30773 OF 2025 (T-RES)

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BETWEEN:

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MOHAMMED GHANI, AGED ABOUT 70 YEARS, E42, MANGO GARDEN, KANAKAPURA ROAD, KONANKUNTE CROSS, DODDKALLASANDRA, BANGALORE - 560062

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…PETITIONER

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(BY SRI. VENKATANARAYANA G.M., ADVOCATE)

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AND:

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Digitally signed by VIJAYA P Location: HIGH COURT OF KARNATAKA

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THE COMMISSIONER OF CENTRAL TAX, WEST COMMISSIONERATE, 1^ST FLOOR, BMTC BUS STAND, KANAKPURA ROAD, BANASHANKARI, BENGALURU - 560070.

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THE ADDITIONAL COMMISSIONER OF CENTRAL TAX, WEST COMMISSIONERATE, 1^ST FLOOR, BMTC BUS STAND, KANAKPURA ROAD, BANASHANKARI, BENGALURU - 560070.

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THE SUPERINTENDENT OF COMMISSIONER OF CENTRAL TAX, WEST COMMISSSIONERATE,

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1^ST FLOOR, BMTC BUS STAND,

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NC: 2026:KHC:15558 WP No. 30773 of 2025

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HC-KAR

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KANAKAPURA ROAD, BANASHANKARI, BENGALURU - 560 070.

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THE COMMISSIONER OF CENTRAL TAX (APPEALS), S1 AND S2, VINAYAMARG, 1^ST FLOOR, BMTC BUS STAND, KANAKAPURA ROAD, SIDDARTHANAGAR, MYSORE - 570011.

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…RESPONDENTS

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(BY SRI. ARAVIND V. CHAVAN, ADVOCATE FOR R1 TO R4)

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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED RECTIFIED ORDER VIDE 29(R)/2022-23 DATED 11.01.2023 (ANNEXURE-A) PASSED BY RESPONDENT NO.2 DEMANDING SERVICE TAX OF RS.2,98,405/- ALONG WITH INTEREST AND PENALTY FOR THE FINANCIAL YEAR 2014-17 AND ETC.,

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THIS PETITION, COMING ON FOR FRESH MATTERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV

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3 - NC: 2026:KHC:15558 WP No. 30773 of 2025

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HC-KAR

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ORAL ORDER

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The petitioner has called in question the validity of the order of rectification dated 11.01.2023 passed by respondent No.2 raising a demand of Service Tax of Rs.2,98,405/- along with interest and penalty for the financial year 2014-17. The petitioner has also challenged the legality of the recovery notices issued at Annexure-G.

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It is the case of the petitioner that show-cause notice was issued by the Joint Commissioner of Central Tax alleging short payment of Service Tax based on the difference between gross value on basis of Income Tax Returns vis-à-vis declaration under the Service Tax Returns. On 23.09.2022, it is stated that Order-in-Original came to be passed.

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Learned counsel for the petitioner submits that

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an appeal was filed against the Order-in-Original on 22.12.2022 and the appeal came to be disposed of by order dated 29.05.2023. It is submitted that in the

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4 - NC: 2026:KHC:15558 WP No. 30773 of 2025

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HC-KAR

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interregnum, the revenue sought for suo-moto rectification and the Order-in-Original came to be rectified by virtue of the order at Annexure-A dated 11.01.2023.

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It is the case of the petitioner that where the power of suo-moto rectification is invoked, there could not be an enhancement of liability of the petitioner without an opportunity of hearing, in light of Section 74(4) of the Finance Act, 1994 (for short 'the Act'). It is submitted that the petitioner was not aware of the order of rectification that was passed without notice to the petitioner.

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It is however submitted that the Order-inOriginal itself which was the subject matter of the appeal proceedings came to be modified by the order of the appellate authority, wherein the appellate authority has considered the aspect of shortfall of payment of tax. It is submitted that in light of the Order-in-Appeal having been passed, the order of rectification passed subsequently may have to be ignored.

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5 - NC: 2026:KHC:15558 WP No. 30773 of 2025

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HC-KAR

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Learned counsel for the revenue submits that

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the order of rectification may require to be revisited, as the aspect of rectification order passed was not brought to the notice of the appellate authority.

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In light of the facts as made out and noticing

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that the Order-in-Original came to be modified in accordance with law by virtue of the Order-in-Appeal by order dated 29.05.2023, the order of rectification that is passed without opportunity to the petitioner, would be an order passed in violation of the legal mandate under Section 74(4) of the Act.

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Accordingly, the order of rectification at Annexure-A is set aside. Matter is remitted to respondent No.2 to reconsider the proceedings while the respondent No.2 is also to take note of the Order-in-appeal at Annexure-H.

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The contention of the petitioner that the Orderin-Appeal results in merger of Order-in-Original and

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6 - NC: 2026:KHC:15558 WP No. 30773 of 2025

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HC-KAR

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accordingly, the order of rectification may have to be revoked, is an aspect to be looked into by respondent No.2.

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In light of the above, the action of attaching the petitioner's bank account subsequent to the demand raised, consequent to the rectification order, it would be required to be rescinded by appropriate instructions from the department forthwith. Petitioner to appear before respondent No.2 without further notice on 16.04.2026.

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Accordingly, petition is disposed of .

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SD/(S SUNIL DUTT YADAV) JUDGE

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MCR

Mohammed Ghani v. the Commissioner of Central Tax

Case brief

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Mohammed Ghani v. the Commissioner of Central Tax

Case brief

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