The Karnataka High Court allowed GST adjudication against Sanvi Creations to proceed after the taxpayer said its audit objections had not been considered before a DRC-01 show-cause notice was issued. The reported order treated the notice reply and a requested personal hearing as opportunities to contest the proposed demand; it did not decide whether the demand was legally or factually correct.
What happened in the Sanvi Creations case?
According to the order text reproduced in a TaxGuru report published on 7 October 2026, Sanvi Creations challenged an audit report dated 31 August 2026 and a DRC-01 show-cause notice dated 2 September 2026. The taxpayer said its objections to the audit observations, dated 30 July 2026, had not been considered before the notice was issued.
The Government Pleader argued that the audit was intended to assess whether proceedings under sections 73 or 74 of the Karnataka and Central GST Acts were warranted. The taxpayer could respond in detail to the DRC-01 notice and request a personal hearing under section 75(4). The Court found considerable force in that submission and accepted that the adjudication stage offered an opportunity to contest the proposed demand.
What did the Court direct?
The report says the Court extended the time for a detailed reply with supporting documents. The earlier reply deadline was 1 October 2026; the reported order allowed the taxpayer to file by 23 October 2026. It also directed the first respondent to provide a personal hearing if the taxpayer sought one under section 75(4), and to conclude the proceedings with cogent reasons.
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Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →The report does not provide the case number or the order date. Readers seeking to cite or rely on the decision should verify those particulars against the official Karnataka High Court record.
Can a taxpayer raise audit objections in a DRC-01 reply?
In this case, the Court accepted that Sanvi Creations could contest the proposed demand through a detailed response to the show-cause notice, despite its complaint that the earlier audit objections had not been considered. The practical lesson is to address the notice’s allegations and proposed demand directly, explain why the audit findings are disputed, and attach relevant records.
This is a case-specific procedural outcome, not a general ruling that audit-stage objections can always be left unanswered or that any objection may safely be postponed. The reported order does not determine what a different taxpayer should do in a different proceeding.
How does DRC-01 fit into the process?
The Karnataka GST Audit Manual describes DRC-01A as a pre-notice intimation associated with sections 73(5) or 74(5), and distinguishes it from the show-cause and adjudication process. The manual also describes the summary in Form GST DRC-01 as accompanying the show-cause notice. This is departmental guidance; consult the current legislation and rules for the applicable requirements in a particular case.
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The manual describes a reasoned adjudication order as one that engages with the notice, the taxpayer’s objections and hearing submissions, the applicable law, and the authority’s findings. In Sanvi Creations, the Court separately directed the authority to conclude the proceedings with cogent reasons.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What this ruling does—and does not—decide
- It addresses procedure: the taxpayer was given time to submit a documented reply and an opportunity to request a section 75(4) hearing.
- It does not uphold the proposed tax demand on its merits: the reported order does not decide whether the tax or other amount proposed in the notice is due.
- It does not report the final adjudication result: the authority was directed to complete the proceedings with cogent reasons, but the report does not establish what that later decision was.
The report attributes to Government Pleader Ms. Jyoti M. Maradi the submission that the taxpayer could answer the proposed demand and seek a hearing. That was counsel’s argument, not a quotation presented as the Court’s own holding.
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