Facts of the Case

The petitioner, M/s Dhanvantari Medico, challenged the appellate order dated 02.03.2022 passed by the Additional Commissioner of State Tax (Appeal), Patna West Circle, as well as the assessment order dated 11.02.2021 passed by the Assistant Commissioner of State Tax under Section 73 read with Section 50 of the Bihar Goods and Services Tax Act, 2017 for the financial years 2018-19 and 2019-20.

The petitioner contended that both the assessment and appellate orders had been passed ex parte, without granting a meaningful opportunity of hearing. It was further alleged that the appellate authority dismissed the appeal through a cryptic and non-speaking order without considering the grounds raised. The petitioner also challenged the denial of Input Tax Credit on account of the supplier's alleged default and questioned the legality of recovery proceedings initiated against it.

 Issues Involved

  1. Whether the assessment order passed under Section 73 of the Bihar GST Act, 2017 without providing adequate opportunity of hearing was legally sustainable.
  2. Whether an ex parte and non-speaking appellate order could be sustained in law.
  3. Whether violation of the principles of natural justice justified interference by the High Court despite the existence of statutory remedies.
  4. Whether the Assessing Authority was required to pass a reasoned and speaking order after considering all facts and legal submissions.
  5. Whether coercive recovery proceedings could continue during fresh adjudication.

 Petitioner's Arguments

  • The assessment proceedings were concluded without providing sufficient opportunity to present its case.
  • The assessment order was passed ex parte without proper appreciation of facts and evidence.
  • The appellate authority mechanically dismissed the appeals through a cryptic and non-speaking order.
  • Tax liability, interest and penalty had been imposed without assigning proper reasons.
  • The denial of Input Tax Credit solely because of the supplier's alleged default was illegal.
  • The authorities failed to consider relevant legal and factual issues before confirming the demand.
  • Recovery proceedings based upon such illegal orders deserved to be quashed.

 Respondent's Arguments

The Revenue fairly submitted before the High Court that it had no objection if the matter was remanded to the Assessing Authority for fresh adjudication on merits.

The Revenue further agreed that:

  • the matter could be decided afresh,
  • principles of natural justice would be followed, and
  • no coercive action would be taken during pendency of the fresh proceedings.

 Court Order / Findings

The Patna High Court held that although statutory remedies ordinarily exist, the High Court can exercise writ jurisdiction where orders are ex facie illegal due to violation of principles of natural justice.

The Court found that:

  • adequate opportunity of hearing had not been granted;
  • both the assessment and appellate orders were passed ex parte;
  • the authorities failed to assign proper reasons while determining tax liability;
  • the impugned orders were non-speaking and suffered from procedural illegality;
  • even ex parte proceedings require proper consideration of facts and law;
  • orders involving civil consequences must strictly comply with principles of natural justice.

Accordingly, the Court:

  • quashed the assessment order dated 11.02.2021;
  • quashed the appellate order dated 02.03.2022;
  • remanded the matter to the Assessing Authority for fresh adjudication;
  • directed the petitioner to deposit an additional 10% of the disputed demand within four weeks (without prejudice to its rights);
  • directed immediate de-freezing/de-attachment of the petitioner's bank accounts, if attached;
  • restrained the department from taking coercive recovery action during pendency of fresh proceedings;
  • directed the Assessing Authority to provide adequate opportunity of hearing;
  • directed that a reasoned speaking order be passed after considering all materials;
  • clarified that all issues on merits remained open for fresh adjudication.

 Important Clarification

The High Court clarified that:

  • violation of principles of natural justice is sufficient ground to invoke writ jurisdiction;
  • an ex parte order must still contain proper reasoning;
  • tax authorities cannot pass mechanical assessment orders merely because the assessee does not appear;
  • speaking orders are mandatory in GST adjudication;
  • recovery proceedings should not continue when assessment itself is set aside;
  • remand does not amount to acceptance of the assessee's claims on merits;
  • all legal and factual issues remain open before the Assessing Authority.

 Sections Involved

  • Section 73 – Bihar Goods and Services Tax Act, 2017 (Determination of tax not paid or short paid without fraud)
  • Section 50 – Bihar Goods and Services Tax Act, 2017 (Interest on delayed payment of tax)
  • Section 107 – Bihar Goods and Services Tax Act, 2017 (Appeals)
  • Article 226 – Constitution of India (Writ Jurisdiction)
  • Principles of Natural Justice

Link to download the order-https://mytaxexpert.co.in/uploads/1783921441_4005compressed.pdf

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