Karnataka HC Quashes GST DRC-13 Issued to Company for Dues of Another Entity, Orders Refund [Read Order]
The Bench opined that merely because one individual was a director in both companies could not justify lifting the corporate veil
![Karnataka HC Quashes GST DRC-13 Issued to Company for Dues of Another Entity, Orders Refund [Read Order]](https://images.taxscan.in/h-upload/2026/02/13/2125001-karnataka-hc-quashes-gst-drc-13-issued-company-dues-another-entity-orders-refund-taxscan.webp "Karnataka HC Quashes GST DRC-13 Issued to Company for Dues of Another Entity, Orders Refund [Read Order]")
The Karnataka High Court has set aside a GST recovery notice issued in Form DRC-13 after holding that tax authorities cannot recover dues of one company from the bank account of another independent company merely because both entities share a common director. The Court also directed the tax department to consider refund of the amount already recovered along with applicable...
The Karnataka High Court has set aside a GST recovery notice issued in Form DRC-13 after holding that tax authorities cannot recover dues of one company from the bank account of another independent company merely because both entities share a common director. The Court also directed the tax department to consider refund of the amount already recovered along with applicable interest.
The writ petition was filed by Ramms India Pvt. Ltd., challenging Form GST DRC-13 dated October 14, 2025. A sum of ₹24.73 lakh was recovered from the petitioner’s bank account. The recovery action was initiated even though the GST demand pertained to a different private limited company, against whom adjudication proceedings had been concluded earlier under the Karnataka GST Act.
While allowing the petition, Justice S.R.Krishna Kumar observed that the show cause notice under Section 73 of the KGST Act was issued only to the defaulting company. The adjudication order confirming the demand was also passed against that entity only. Despite this, the department did not attempt recovery from the said company.
The Court observed that both companies are independent entities, and the petitioner was neither a garnishee nor liable to pay any amount to the defaulting company. It was further held that the mere fact that one individual was a director in both companies could not justify lifting the corporate veil for the purpose of tax recovery.
Placing reliance on its earlier decision in SJR Prime Corporation Private Limited v. Superintendent of Central Tax and the Bombay High Court ruling in Galaxy International v. Union of India, the Court reiterated that recovery proceedings under Section 79 of the CGST Act must strictly follow the statutory procedure. It cannot be enforced against third parties without legal basis.
Accordingly, the High Court quashed the impugned Form and directed the department to pass appropriate refund orders along with interest within stipulated time.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
