Facts of the Case

The petitioner challenged the GST proceedings initiated by the State Tax Department for the tax period October 2019 to March 2020. A show cause notice dated 11.12.2020 was issued proposing tax demand under Section 74 of the Bihar Goods and Services Tax Act, 2017. However, the petitioner contended that only 17 days' effective notice was granted before the department proceeded with the adjudication.

Subsequently, the Assistant Commissioner passed an assessment order dated 08.01.2021, followed by issuance of Form GST DRC-07 dated 09.01.2021 demanding Rs. 19,96,982/-. Thereafter, the petitioner's bank account was attached through Form GST DRC-13 dated 23.03.2022.

The petitioner submitted that he had subsequently filed all pending returns and discharged the applicable tax, interest, and penalty, yet coercive recovery proceedings continued.

 Issues Involved

  1. Whether the assessment order passed under Section 74 of the BGST/CGST Act, 2017 was valid when the mandatory statutory period of 30 days for replying to the show cause notice was not granted.
  2. Whether the consequential GST DRC-07 demand order and DRC-13 attachment proceedings could survive when the adjudication itself violated the statutory provisions and principles of natural justice.
  3. Whether the assessment order deserved to be quashed and the matter remanded for fresh adjudication.

 Petitioner's Arguments

  • The petitioner argued that the show cause notice dated 11.12.2020 did not provide the mandatory statutory period prescribed under Section 74 of the BGST Act.
  • It was submitted that the assessment order was passed before expiry of the statutory period, thereby violating both the Act and the principles of natural justice.
  • The petitioner further contended that after filing the pending GST returns, he had already paid the applicable tax, interest, and penalty, yet recovery proceedings including bank attachment continued.
  • It was prayed that the show cause notice, adjudication order, DRC-07 demand, and DRC-13 attachment be quashed and the matter be reconsidered after following due process.

 Respondent's Arguments

The State defended the assessment proceedings. However, it was not disputed before the Court that the statutory period of 30 days contemplated under Section 74 had not been afforded before passing the adjudication order.

 Court Order / Findings

The Patna High Court observed that the provisions of Section 74 of the CGST/BGST Act, 2017 require that a taxpayer must be afforded the minimum statutory period of 30 days before adverse adjudication.

The Court found that although the notice dated 11.12.2020 directed the petitioner to appear on 28.12.2020, the assessment order was passed on 08.01.2021, without granting the mandatory statutory period contemplated under the Act.

Holding that the statutory requirement had been violated, the Court ruled that the proceedings were unsustainable.

Accordingly, the Court:

  • Quashed the show cause notice dated 11.12.2020.
  • Quashed the assessment order dated 08.01.2021.
  • Quashed Form GST DRC-07 dated 09.01.2021.
  • Directed the assessing authority to issue a fresh notice strictly in accordance with the statutory provisions.
  • Directed that fresh proceedings be completed in accordance with law after granting adequate opportunity to the petitioner.
  • Recorded the petitioner's undertaking to cooperate in the fresh proceedings.

The writ petition was accordingly allowed.

 Important Clarification

  • The statutory period prescribed under Section 74 of the BGST/CGST Act, 2017 is mandatory.
  • Any adjudication order passed without granting the prescribed opportunity is liable to be quashed.
  • Compliance with the principles of natural justice is an essential requirement in GST adjudication.
  • Consequential recovery proceedings, including GST DRC-07 demand orders and DRC-13 attachment proceedings, cannot survive if the foundational assessment order is set aside.
  • The judgment reiterates that procedural safeguards under the GST law cannot be bypassed by the tax authorities.

 Sections Involved

  • Section 74 of the Central Goods and Services Tax Act, 2017
  • Section 74 of the Bihar Goods and Services Tax Act, 2017
  • Principles of Natural Justice
  • GST DRC-07
  • GST DRC-13

Link to Download the Order-https://mytaxexpert.co.in/uploads/1783923967_4017compressed.pdf

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