Facts of the Case:

The petitioner challenged a revisionary show cause notice dated 05.11.2025 issued by the respondent under Section 108(1) of the CGST/KGST Act, 2017, seeking to revise an audit report dated 22.02.2023, which itself was issued pursuant to earlier audit reports dated 06.12.2022 and 22.02.2023. The petitioner contended that the invocation of revisional powers against an audit report is wholly without jurisdiction and contrary to the statutory scheme under the GST law.

It was specifically pleaded that no proceedings under Section 73 or Section 74 of the CGST/KGST Act had been initiated either prior to or even after the issuance of the impugned revisionary notice. he petitioner relied upon a recent judgment of the same High Court in M/s Navayuga Engineering Company Limited v. Joint Commissioner of Commercial Taxes , wherein it was categorically held that revisionary powers under Section 108 cannot be exercised to revise an audit report, and that the only permissible statutory route post audit is initiation of proceedings under Sections 73 or 74. The respondent opposed the petition on the ground that the writ petition was premature as the challenge was only to a show cause notice, but did not dispute the fact that no proceedings under Sections 73 or 74 had been initiated.

Issue:

Whether the tax authorities can invoke revisional powers under Section 108 of the CGST/KGST Act, 2017 to revise or reopen an audit report, without initiating proceedings under Section 73 or Section 74, and whether such a show cause notice is without jurisdiction and liable to be quashed at the threshold.

Held that:

The High Court held that the impugned revisionary notice issued under Section 108 was wholly without jurisdiction and impermissible in law. The Court emphasized that Section 65(7) of the KGST Act clearly provides the statutory consequence of an audit, namely, that if audit detects short payment, non-payment, or wrongful availment of ITC, the proper officer must initiate proceedings under Section 73 or Section 74, as the case may be.

A plain reading of Section 65(7) makes it abundantly clear that revision under Section 108 is not a substitute for adjudication proceedings under Sections 73 or 74. The Court reaffirmed its earlier ruling in Navayuga Engineering Company Limited, holding that once an audit report is issued, the department cannot bypass the adjudicatory mechanism prescribed by law and instead resort to revisional jurisdiction to re-examine or revise the audit findings.

The Court further rejected the contention that the writ petition was premature, observing that when the very assumption of jurisdiction is illegal, the availability of an alternate remedy by way of replying to the show cause notice does not bar the exercise of writ jurisdiction under Article 226. Reliance was placed on the Supreme Court judgment in Radha Krishan Industries v. State of Himachal Pradesh to hold that jurisdictional errors go to the root of the matter and can be corrected at the notice stage itself.

Accordingly, the impugned revisionary notice dated 05.11.2025 was quashed, while reserving liberty in favour of the respondent to initiate proceedings strictly in accordance with law, i.e., under Sections 73 or 74, subject to limitation and other statutory safeguards.

Case Name: M/s. NL Tile Art Private Limited Versus Additional Commissioner of Commercial Taxes (Smr-2), Bangalore. dated 18.12.2025

To read the complete judgement 2025 Taxo.online 3552