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2025 Supreme(Kar) 2595
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
S.R.KRISHNA KUMAR, J.
M/s Avasarala Technologies Ltd. – Appellant
Versus
Deputy Commissioner of Commercial Taxes (Audit) Bengaluru – Respondent
Writ Petition No. 21926 of 2025
Decided On : 19-11-2025
For the Appellant : B.G. Chidananda URS
For the Respondent: Jyothi M. Maradi
A party cannot be penalized for failing to fulfill obligations due to statutory restrictions, particularly in insolvency scenarios.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 14 - Petitioner's appeal against proceedings initiated during moratorium period under IBC. Court acknowledged statutory bars on payment during moratorium, finding that earlier proceedings were void ab initio. Legal principle established prevents recovery of dues when statutory impediments exist. (Paras 2, 18-28)
(B) Certiorari - Quashment of show cause notices and orders issued under the Goods and Services Tax framework found invalid due to statutory overreach during insolvency process. The court emphasizes appropriate procedural conduct even within tax compliance frameworks. (Paras 6, 8, 29)
Facts of the case:
The petitioner claimed it could not pay GST dues due to a moratorium imposed by the NCLT, preventing any financial transactions. Subsequent recovery actions by the revenue were challenged as illegal due to this moratorium.
Findings of Court:
The High Court quashed the prior proceedings, directing the respondents to refund amounts to the petitioner, emphasizing the necessity of adherence to the IBC during such periods.
Issues: The question pertained to the legality of tax recovery during an existing moratorium on the petitioner.
Ratio Decidendi: The judgment stressed that individuals cannot be penalized for statutory constraints, declaring that legal impediments prevent enforcement of debts during moratorium periods.
Result: Petition allowed; all challenged orders quashed, with directives provided for refunding amounts to the petitioner.
ORDER :
1. In this petition, petitioner seeks for the following reliefs:-
“A) To issue a writ of Certiorari, or such other writ, order or direction as this Hon'ble Court may deem fit and quash the show cause notice No.Adcom/Enf/SZ/ACCT- 16/Adj/2024-25 dated 16.08.2024 is herewith enclosed as Annexure "B" as being void ab inito, being proceedings initiated during moratorium period and all the further proceedings initiated against the show notice.
B) To issue a writ of Certiorari, or such other writ, order or direction as this Hon'ble Court may deem fit and quash the Orders of the Adjudicating Authority in for the Financial Year 2020-21 in No.DCCT (Audit) 4.1/GST- ADJ/2024-25 dated 19.02.2025 which order is herewith enclosed as Annexure "D", summary of the order was also uploaded in FORM GST DRC-07 vide Reference No.ZD2902250793454 dated 20.02.2025 which is herewith enclosed as Annexure "D-1", Financial Year 2022-23 No.DCCT(Audit)4.1/GST-ADJ/2024-25 dated 27.02.2025 which order is herewith enclosed as Annexure "E", summary of the order was also uploaded in FORM GST DRC-07 vide Reference No.ZD2902251102065 dated 27.02.2025 which is herewith enclosed as Annexure "E-1", Financial Year 2023-24 in No.DCCT(Audit)4.1/GST- ADJ/2024-25 dated 27.02.2025 which order is herewith enclosed as Annexure "F", summary of the order was also uploaded in FORM GST DRC-07 vide Reference No.ZD2902251102840 dated 27.02.2025 which is herewith enclosed as Annexure "F-1"
C) To issue a writ of Certiorari, or such other writ, order or direction as this Hon'ble Court may deem fit to quash the order passed in Appeal by the Joint Commissioner of Commercial Taxes (Appeals)-8, in GST.AP.No.158/24-25 vide Order No.ZD2907250374254 dated 10.07.2025 for the Financial Year 2020-21, which is herewith enclosed as Annexure "H". Petitioner was also served with the order of the First Appellate Authority for the Financial Year 2022-23 in GST.AP.No.159/24-25 vide Order No.ZD2907250373933 dated 10.07.2025 which is herewith enclosed as Annexure "H-1". Petitioner was further served with the order of the First Appellate Authority for the Financial Year 2023-24 in GST.AP.No.160/24-25 vide Order No.ZD2907250373751 dated 10.07.2025 which is herewith enclosed as Annexure "H-2".
D) To issue such other writ or direction as it deems it fit to direct the reversal/refund the suo moto debits of the amounts made on 29.5.2025 vide the Electronic Credit Ledger, Electronic Cash Ledger for the Financial Years 2020-21, 2022-23 and 2023-24 which Ledger extracts are enclosed as Annexure "J", "J-1".
E) To issue a writ of Certiorari, or such other writ, order or direction as this Hon'ble Court may deem fit to quash the garnishee notice issued to the Bank in No.DGSTO-4/DCCT(A)-4.1/2025-26 dated 10.07.2025 for the Financial Year 2020-21 which is herewith enclosed as Annexure "J-2", in No.DGSTO-4/DCCT(A)-4.1/2025-26 dated 10.07.2025 for the Financial Year 2022-23 enclosed as Annexure J-3, in No.DGSTO-4/DCCT(A)-4.1/2025-26 dated 10.07.2025 for the Financial Year 2023-24 enclosed as Annexure "J-4"
F) To issue such other writ or direction as it deems it fit to grant in the facts and circumstances of the case to meet the ends of justice and equity.”
2. A perusal of the material on record will indicate that vide order dated 04.07.2023, the NCLT declared / imposed moratorium upon the petitioner-company under Section 14 of the Insolvency and Bankruptcy Code, 2016 (for short ‘the IBC’). Subsequently, on 16.08.2023, the respondents-revenue issued show cause notice, to which the petitioner submitted reply and the proceedings culminated in orders dated 17.01.2025 and 27.02.2025, aggrieved by which, the petitioner filed appeals before the appellate authority, during the pendency of which, the respondents appropriated various sums of money from Electronic Credit Ledger (ECL) of the petitioner on the ground that the petitioner had not made payment and also not deposited the mandatory pre-deposit before the respondents-re
