Facts of the Case

The petitioner, Umakant Singh, challenged the ex parte assessment order dated 04.02.2021 along with the summary order issued in Form GST DRC-07 by the Assistant Commissioner of State Taxes, Katihar Circle, under Section 73 of the Central Goods and Services Tax Act, 2017 and the corresponding provisions of the Bihar Goods and Services Tax Act, 2017. The petitioner contended that the assessment order had been passed without granting a reasonable opportunity of hearing and without assigning proper reasons. The petitioner also sought protection against coercive recovery proceedings and requested recognition of Input Tax Credit (ITC) despite alleged GSTR-2A mismatch caused by supplier defaults.

 Issues Involved

  1. Whether an ex parte assessment order passed without adequate opportunity of hearing violates the principles of natural justice.
  2. Whether a non-speaking assessment order under Section 73 is legally sustainable.
  3. Whether the High Court can exercise writ jurisdiction despite availability of an alternative statutory remedy.
  4. Whether coercive recovery can continue when the assessment order itself suffers from procedural illegality.
  5. Whether denial of Input Tax Credit solely due to GSTR-2A mismatch or supplier default is justified.

 Petitioner's Arguments

  • The assessment proceedings were conducted without granting sufficient opportunity to present the case.
  • The impugned order was passed ex parte and did not contain any proper reasoning.
  • Mere mismatch in GSTR-2A cannot automatically result in denial of legitimate Input Tax Credit.
  • Tax already paid to the supplier should not prejudice the purchaser due to supplier's failure to deposit tax.
  • The department ought to initiate proceedings against the defaulting supplier instead of denying ITC to the purchaser.
  • The recovery proceedings based on such an illegal order deserved to be stayed.

 Respondent's Arguments

  • The Revenue fairly submitted before the Court that it had no objection if the matter was remanded to the Assessing Authority for fresh adjudication.
  • It was further stated that the case may be decided afresh on merits.
  • The Revenue also agreed that no coercive steps would be taken during the pendency of fresh proceedings.

 Court Order / Findings

The Patna High Court allowed the writ petition and held that the impugned assessment order could not be sustained in law.

The Court observed that:

  • The petitioner had not been afforded a fair and adequate opportunity of hearing.
  • The assessment order was ex parte and failed to disclose proper reasons for determining tax liability.
  • Even in ex parte proceedings, the assessing authority is required to examine the facts and law and pass a reasoned speaking order.
  • Violation of the principles of natural justice justified interference by the High Court despite the availability of an alternative statutory remedy.

Accordingly, the Court:

  • Quashed the assessment order dated 04.02.2021 and the corresponding GST DRC-07.
  • Directed the petitioner to deposit 20% of the disputed demand within four weeks without prejudice to its rights.
  • Directed immediate de-freezing/de-attachment of the petitioner's bank account, if attached.
  • Directed the petitioner to appear before the Assessing Authority on the specified date.
  • Directed the Assessing Authority to provide adequate opportunity of hearing.
  • Directed the authority to pass a fresh speaking order after considering all relevant facts and documents.
  • Directed that no coercive action shall be taken during fresh adjudication.
  • Clarified that all issues on merits were kept open for fresh consideration.

 Important Clarification

This judgment reiterates the settled legal principle that:

  • An assessment order passed under Section 73 without proper opportunity of hearing is liable to be set aside.
  • A speaking order containing reasons is mandatory even where the proceedings are ex parte.
  • The existence of an alternative appellate remedy does not bar the High Court from exercising writ jurisdiction where there is a clear violation of natural justice.
  • Recovery proceedings cannot continue on the basis of an order suffering from procedural illegality.
  • The Court left the substantive issue relating to Input Tax Credit open for fresh adjudication.

 Sections Involved

  • Section 73 – Determination of tax not paid, short paid or erroneously refunded under the CGST Act, 2017
  • Section 16(2)(c) – Eligibility and conditions for Input Tax Credit
  • Section 76 – Tax collected but not paid to Government
  • Section 29 – Cancellation of Registration
  • Form GST DRC-07
  • Corresponding provisions of the Bihar Goods and Services Tax Act, 2017

Link to Download the Order-https://mytaxexpert.co.in/uploads/1783922887_4012compressed.pdf

 Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.