Facts of the Case

M/s S.S. Diagnostics and Surgical, a proprietorship firm, filed a writ petition challenging the order dated 31.03.2022 passed by the Assistant Commissioner of State Taxes, Patna North Circle, Patna, under Section 73(9) of the Bihar GST Act, 2017, along with the consequential Summary of Order/Demand Notice in Form GST DRC-07 for the tax period 2018-19.

The petitioner contended that the impugned proceedings were contrary to the principles of natural justice, alleging that the order had been passed without proper opportunity to represent its case. The challenged order was ex parte in nature. The petitioner also sought protection against recovery of the disputed demand during pendency of the proceedings.

The High Court examined the record and found that sufficient opportunity had not been afforded to the petitioner and that the ex parte order did not assign reasons sufficient to show how the amount due and payable by the assessee had been determined.

Issues Involved

The principal issues before the High Court were:

  1. Whether the order dated 31.03.2022 passed under Section 73(9) of the Bihar GST Act, 2017, together with the consequential GST DRC-07 demand notice, was sustainable when the petitioner had not been afforded sufficient opportunity to represent its case.
  2. Whether an ex parte adjudication order imposing tax consequences could survive when it failed to disclose sufficient or decipherable reasons for determination of the amount allegedly due and payable.
  3. Whether the High Court could exercise its writ jurisdiction despite availability of a statutory remedy, where the impugned order was ex facie affected by violation of principles of natural justice.
  4. Whether the adjudicating authority was required to deal with all relevant issues of fact and law even where proceedings were conducted ex parte.

Petitioner’s Arguments

The petitioner challenged the order passed under Section 73(9) and the consequential Form GST DRC-07, principally contending that:

  • the impugned order was passed in violation of the principles of natural justice;
  • sufficient and effective opportunity of hearing and representation was not afforded;
  • the order was ex parte in nature;
  • penalty and interest consequences could not validly be imposed without proper opportunity to contest the proceedings;
  • coercive recovery of the disputed demand should not be undertaken during pendency of the challenge; and
  • the impugned order and consequential demand notice deserved to be quashed.

Respondents’ Arguments / Revenue’s Stand

Learned counsel for the Revenue stated before the High Court that the Revenue had no objection to remand of the matter to the Assessing Authority for fresh decision.

The Revenue further stated that:

  • the matter could be decided afresh on merits; and
  • during pendency of the proceedings, no coercive steps would be taken against the petitioner.

The High Court accepted and took this statement on record.

Court’s Findings

The High Court held that the existence of a statutory remedy did not preclude interference in writ jurisdiction where the impugned order was ex facie bad in law.

The Court recorded significant findings that:

  • there was a violation of principles of natural justice, particularly because no sufficient time was afforded to the petitioner to represent its case;
  • the order was ex parte in nature;
  • the order did not assign reasons sufficient, or even decipherable from the record, to explain how the officer determined the amount due and payable by the assessee;
  • an ex parte order passed in violation of natural justice entailed civil consequences; and
  • the authorities had not adjudicated the matter upon the attending facts and circumstances.

The Court further clarified that all issues of fact and law ought to be dealt with even if the proceedings are ex parte in nature.

Court Order / Final Directions

The High Court disposed of the writ petition on mutually agreeable terms and issued the following material directions:

  • The impugned order dated 31.03.2022 passed by the Assistant Commissioner of State Taxes, Patna North Circle, Patna, and the consequential GST DRC-07 demand notice for 2018-19 were quashed and set aside.
  • The petitioner undertook to deposit 20% of the demand amount before the Assessing Officer within eight weeks.
  • Such deposit was directed to remain without prejudice to the respective rights and contentions of the parties and subject to the fresh order of the Assessing Officer.
  • If the petitioner had already deposited an amount up to 20%, the same was to be set off against the required deposit.
  • Any excess deposit was directed to be refunded within two months from the date of passing of the order.
  • The Court directed immediate de-freezing/de-attachment of the petitioner’s bank account(s), if attached with reference to the proceedings forming the subject matter of the writ petition.
  • The petitioner undertook to appear before the Assessing Authority on 30.11.2022 at 10:30 A.M., if possible through digital mode.
  • The Assessing Authority was directed to decide the matter afresh on merits after complying with principles of natural justice.
  • The parties were to be afforded an opportunity of hearing and to place all essential documents and materials on record, if required and desired.
  • During pendency of the assessment proceedings, no coercive steps were to be taken against the petitioner.
  • A fresh order could be passed only after providing adequate opportunity to all concerned, including the writ petitioner.
  • The petitioner was required to fully cooperate and avoid unnecessary adjournments.
  • The matter was to be decided expeditiously, preferably within two months from the petitioner’s appearance.
  • The Assessing Authority was required to pass a speaking order assigning reasons and supply a copy to the parties.
  • Liberty was reserved to the petitioner to challenge the fresh order, if required and desired.
  • All issues were expressly left open, and the Court did not express any opinion on the merits.
  • Proceedings were, if possible, to be conducted through digital mode.

Important Clarification

The judgment provides an important clarification concerning GST adjudication under Section 73:

Even where proceedings are ex parte, the adjudicating authority must deal with all relevant issues of fact and law and must pass a reasoned order showing the basis on which the amount due and payable has been determined.

The ruling further clarifies that availability of an alternative or statutory remedy does not necessarily bar writ interference where the impugned order is ex facie unsustainable because of violation of natural justice, inadequate opportunity of hearing, absence of sufficient reasons, and failure to adjudicate the relevant facts and legal issues.

It is also important that the Court did not decide the substantive tax liability on merits. The demand order was set aside on the identified procedural and adjudicatory deficiencies, and all merits were left open for fresh consideration.

Sections / Provisions Involved

Section 73(9) of the Bihar Goods and Services Tax Act, 2017 — statutory provision under which the impugned adjudication order was passed.

Form GST DRC-07 — consequential summary of the order/demand notice challenged before the High Court.

Principles of Natural Justice — particularly adequate opportunity to represent the case, fair hearing, and reasoned adjudication.

Constitutional Writ Jurisdiction — exercised by the High Court despite the statutory remedy because the Court found grounds warranting interference with an ex facie legally defective order.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783317983_1101compressed.pdf 

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