Facts of the Case

The petitioner, Priya Devi, challenged two assessment orders passed under Section 74 of the Bihar Goods and Services Tax Act, 2017 (BGST Act) along with the corresponding GST DRC-07 demand orders. The impugned orders imposed tax, interest, and penalty for the tax periods October 2018 to March 2019 and October 2019 to March 2020.

The petitioner contended that the assessment orders were passed ex parte without providing an effective opportunity of hearing. It was further submitted that the GST returns for the relevant periods had subsequently been filed and the applicable tax, interest, and penalty had already been deposited. Therefore, the petitioner sought quashing of the assessment orders and remand of the matter for fresh adjudication after granting a proper hearing.

 Issues Involved

  1. Whether an assessment order passed under Section 74 of the BGST Act, 2017 without granting an effective opportunity of hearing is sustainable in law.
  2. Whether an ex parte GST assessment order lacking proper reasoning violates the principles of natural justice.
  3. Whether the High Court can exercise writ jurisdiction despite the availability of an alternative statutory remedy when the assessment suffers from procedural illegality.

 Petitioner's Arguments

  • The impugned assessment orders and GST DRC-07 summaries were passed without granting adequate opportunity of hearing.
  • The orders were completely ex parte and did not contain proper reasons for determining the tax liability.
  • The petitioner had subsequently filed the pending GST returns for the relevant tax periods and deposited the applicable tax, interest, and penalty.
  • The matter deserved to be remanded to the Assessing Authority for fresh adjudication after considering all documents and returns filed by the petitioner.

 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.
  • It was also assured that the matter would be decided afresh on merits after providing an opportunity of hearing.
  • The Revenue further stated that no coercive action would be taken against the petitioner during the pendency of the fresh proceedings.

 Court Order / Findings

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

The Court observed that:

  • The assessment orders had been passed in violation of the principles of natural justice.
  • The petitioner was not granted a fair and effective opportunity to present her case.
  • The ex parte orders failed to disclose any proper reasoning explaining how the tax liability had been determined.
  • Even where proceedings are conducted ex parte, the adjudicating authority is required to examine the facts, consider the available materials, and pass a reasoned speaking order.
  • Availability of an alternative statutory remedy does not prevent the High Court from exercising writ jurisdiction where the impugned order is ex facie illegal and violates principles of natural justice.

Accordingly, the High Court:

  • Quashed both assessment orders and the corresponding GST DRC-07 summaries.
  • Directed the petitioner to appear before the Assessing Authority.
  • Directed the Assessing Authority to decide the matter afresh on merits after granting adequate opportunity of hearing.
  • Ordered that the petitioner's bank accounts, if attached, be de-frozen immediately.
  • Directed that no coercive action be taken during the pendency of the fresh proceedings.
  • Directed the Assessing Authority to pass a speaking order assigning detailed reasons.
  • Clarified that if the amount already deposited by the petitioner was found to be in excess, the excess amount should be refunded within two months from the fresh order.
  • Left all issues on merits open for fresh adjudication.

 Important Clarification

This judgment reiterates that:

  • Section 74 proceedings cannot culminate in an ex parte order without granting adequate opportunity of hearing.
  • Every adjudication order creating tax liability must be a reasoned and speaking order.
  • The High Court can interfere under Article 226 despite an alternative statutory remedy where there is:
    • violation of principles of natural justice,
    • absence of adequate hearing,
    • non-speaking assessment order, or
    • patent procedural illegality.
  • Mere issuance of notices is not sufficient; a meaningful opportunity to represent the case must be provided before confirming tax demands.

 Sections Involved

  • Section 74 of the Bihar Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Form GST DRC-07
  • Principles of Natural Justice

Link to download the order-https://mytaxexpert.co.in/uploads/1783923432_4015compressed.pdf

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