Facts of the Case

The petitioner, M/s Metro Brand Ltd., challenged the order dated 17.06.2020 passed by the Additional Commissioner, State Tax (Appeal), Patna, whereby its statutory appeal against the assessment order in Form GST DRC-07 dated 10.08.2019 was dismissed solely on the ground of limitation. The petitioner contended that the show cause notice in GST DRC-01 had never been served through any recognized mode, including registered post, email, or telephone, and therefore the ex parte demand of ₹7,89,476/- (comprising tax, interest, and penalty) was passed without granting an opportunity of hearing. The petitioner also sought de-freezing of its bank account attached pursuant to the proceedings.

 Issues Involved

  1. Whether the appellate authority was justified in dismissing the appeal as time-barred despite the delay being attributable to COVID-19 restrictions.
  2. Whether the assessment order passed in Form GST DRC-07 without proper service of notice violated the principles of natural justice.
  3. Whether an ex parte GST assessment order without assigning reasons could be sustained in law.
  4. Whether the High Court could exercise writ jurisdiction despite the existence of an alternative statutory remedy.

 Petitioner’s Arguments

  • The petitioner submitted that the appeal had been rejected merely on the ground of limitation without considering the extraordinary circumstances arising out of the COVID-19 pandemic.
  • It was argued that the show cause notice in Form GST DRC-01 was never served upon the petitioner through any legally recognized mode.
  • Consequently, the assessment order in Form GST DRC-07 was passed ex parte without affording any opportunity of hearing.
  • The petitioner contended that the assessment order lacked reasons and violated the principles of natural justice.
  • The petitioner further prayed for release of the attached bank account and restoration of proceedings for adjudication on merits.

 Respondent’s Arguments

  • The Revenue submitted that it had no objection if the matter was remanded to the Assessing Authority for fresh adjudication on merits.
  • It was also stated that during the pendency of the fresh proceedings, no coercive steps would be taken against the petitioner.

 Court Order / Findings

The Patna High Court allowed the writ petition and held as follows:

  • The delay in filing the statutory appeal stood sufficiently explained because of the COVID-19 restrictions.
  • The Court observed that the assessment order had been passed ex parte without granting an adequate opportunity of hearing, thereby violating the principles of natural justice.
  • The impugned order did not disclose any reasons explaining how the tax demand had been determined.
  • Even while passing an ex parte order, the adjudicating authority is required to examine the facts and law and pass a reasoned speaking order.
  • The High Court quashed:
    • the appellate order dated 17.06.2020, and
    • the GST DRC-07 order dated 10.08.2019.
  • The matter was remanded to the Assessing Authority for fresh adjudication after granting adequate opportunity of hearing.
  • The petitioner was directed to deposit an additional 10% of the disputed demand before the Assessing Authority, without prejudice to its rights.
  • The Court ordered immediate de-freezing/de-attachment of the petitioner's bank account.
  • No coercive action was to be taken during the pendency of the fresh proceedings.
  • The Assessing Authority was directed to decide the matter by passing a reasoned speaking order after complying with the principles of natural justice.

 Important Clarification

This judgment reiterates that:

  • Mere dismissal of a GST appeal on limitation without considering COVID-related circumstances is unsustainable.
  • Ex parte GST assessment orders cannot survive where proper notice has not been served.
  • A speaking order containing reasons is mandatory even in ex parte proceedings.
  • Violation of the principles of natural justice empowers the High Court to exercise writ jurisdiction notwithstanding the availability of an alternative statutory remedy.
  • Attachment of bank accounts cannot continue once the underlying assessment order is set aside.
  • Fresh adjudication must be conducted strictly in accordance with law after granting adequate opportunity to the taxpayer.

 Sections Involved

  • Section 73 of the Central Goods and Services Tax Act, 2017
  • Section 73 of the Bihar Goods and Services Tax Act, 2017
  • Section 107 of the Central Goods and Services Tax Act, 2017 (Appeals)
  • Section 107 of the Bihar Goods and Services Tax Act, 2017
  • Principles of Natural Justice
  • Article 226 of the Constitution of India

Link to download the order-https://mytaxexpert.co.in/uploads/1783924139_4018compressed.pdf

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