Facts of the Case

The petitioner, M/s Applied Solar Technologies (India) Private Limited, challenged:

  • Order dated 16.08.2019 passed by the Deputy Commissioner of State Taxes rejecting the petitioner's claim for transitional Input Tax Credit under Section 140 read with Rule 117.
  • Summary Order issued in Form GST DRC-07 dated 29.08.2019 demanding SGST, interest and penalty amounting to ₹52,05,950.
  • Appellate order dated 04.10.2021, whereby the Additional Commissioner (Appeal) dismissed the petitioner's appeal without properly appreciating the grounds raised.

The petitioner contended that both the adjudication order and appellate order were passed without granting an adequate opportunity of hearing and in complete violation of the principles of natural justice.

 Issues Involved

  1. Whether the adjudication order rejecting transitional Input Tax Credit under Section 140 was passed in violation of the principles of natural justice.
  2. Whether the appellate authority was justified in dismissing the appeal without proper consideration of the petitioner's submissions.
  3. Whether an ex parte order lacking proper reasons could be sustained under the GST law.
  4. Whether the High Court could interfere despite the existence of statutory remedies where natural justice had been violated.

 Petitioner's Arguments

The petitioner submitted that:

  • The authorities wrongly rejected the claim of transitional Input Tax Credit under Section 140 read with Rule 117.
  • The assessment order was passed without providing adequate opportunity of hearing.
  • The proceedings were conducted ex parte.
  • The adjudicating authority failed to record proper reasons while confirming the tax demand.
  • The appellate authority mechanically dismissed the appeal without considering the grounds raised by the petitioner.
  • The orders suffered from gross violation of the principles of natural justice and therefore 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.
  • The Assessing Authority may decide the matter afresh on merits.
  • No coercive action would be taken against the petitioner during the pendency of fresh proceedings.

The Court accepted this statement.

 Court Order / Findings

The Patna High Court held that:

  • The Court can interfere under Article 226 even where statutory remedies exist if the impugned orders are ex facie illegal.
  • The petitioner was not granted sufficient opportunity of hearing.
  • The assessment order was ex parte in nature.
  • The authorities failed to assign proper and speaking reasons while confirming the demand.
  • The adjudicating authority failed to consider the facts and legal issues involved.
  • Orders resulting in civil consequences must strictly comply with the principles of natural justice.

Accordingly, the Court:

  • Quashed the appellate order dated 04.10.2021.
  • Quashed the assessment order dated 16.08.2019.
  • Quashed the consequential Form GST DRC-07 dated 29.08.2019.
  • Directed fresh adjudication after granting adequate opportunity of hearing.
  • Directed the petitioner to appear before the Assessing Authority.
  • Directed the Assessing Authority to pass a reasoned and speaking order.
  • Ordered de-freezing/de-attachment of the petitioner's bank accounts, if attached.
  • Directed that no coercive action be taken during the pendency of fresh proceedings.
  • Clarified that all issues on merits remain open for fresh consideration.

 Important Clarification

The judgment reiterates that:

  • Violation of the principles of natural justice itself is sufficient to invalidate GST assessment proceedings.
  • Ex parte GST orders must contain detailed reasons.
  • Speaking orders are mandatory under GST adjudication.
  • Even where alternate statutory remedies are available, High Courts may exercise writ jurisdiction if fundamental procedural safeguards are violated.
  • Fresh adjudication must be conducted after providing full opportunity of hearing to the taxpayer.

Sections Involved

  • Section 140 of the Bihar Goods and Services Tax Act, 2017 (Transitional Input Tax Credit)
  • Rule 117 of the Bihar Goods and Services Tax Rules, 2017
  • Form GST DRC-07
  • Principles of Natural Justice
  • Appellate Proceedings under the GST Law

Link to download the order - https://mytaxexpert.co.in/uploads/1783921588_4006compressed.pdf

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